The following trial balance was prepared for Tile, Etc., Inc., on December 31, 2

Question

The following trial balance was prepared for Tile, Etc., Inc., on December 31, 2016, after the closing entries were posted:

account title                          debit                             credit

cash                                  $125,000

account receivable            128,000

allowance for doubful accounts                                      $19,500

inventory                          431,000

account payable                                                          98,000

common stock                                                              465,000

retained earning                                                           101,500

totals                                               $684,000               $684,000

Tile, Et. had the following transactions in 2017:

1. Purchased merchandise on account for $595,000

2. Sold merchandise that cost $435,000 for $920,000 on account

3. Sold for $260,000 cash merchandise that had cost $166,000

4. Sold merchandise for $205,000 to credit card customers. The merchandise had cost $102,000. The credit card company charges a 3 percent fee.

5. Collected $650,000 cash from accounts receivalbe

6. Paid $625,000 cash on accounts payable

7. Paid $148,000  cash for selling and administrative expenses

8. Collected cash for the full amount due from the credit card company (see item 4)

9. Loaned $75,000 to J. Parks. The note had an 6 percent interest rate and a one year term to maturity

10. Wrote off $7,800 of accounts as uncollectible

11. Made the following adjusting entries:

a. Recorded uncollectible accounts expense estimated at 1 percent of sales on account

b. recorded seven months of accrued interest on the note at December 31, 2017 (see item 9)

Required:

a. Prepare general journal entries for these transactions, post the entries to T- accounts, and prepare an income statement, a statement of changes in stockholders' equity, a balance sheet, and a statement of cash flow for 2017.

Explanation / Answer

Journal Entries Date Account Titles Debit Credit 1 Inventory 595000 Accounts Payable 595000 2 Accounts Receivable 920000 Sales 920000 Cost of Goods Sold 435000 Inventory 435000 3 Cash 260000 Sales 260000 Cost of Goods Sold 166000 Inventory 166000 4 Accounts Receivable 198850 Credit Card charges 6150 Sales 205000 Cost of Goods Sold 102000 Inventory 102000 5 Cash 650000 Accounts Receivable 650000 6 Accounts Payable 625000 Cash 625000 7 Selling and Administrative expenses 148000 Cash 148000 8 Cash 198850 Accounts Receivable 198850 9 6% One year Notes Receivable 75000 Cash 75000 10 Allowances for Doubtful debts 7800 Accounts Receivable 7800 11.a. Allowances for Doubtful debts 2500 Income Summary 2500 11.b. Interest Receivable 3937.5 Interest Revenue 3937.5 Cash Date Account Title Debit Date Account Title Credit Beginning Balance 125000 Accounts Payable 625000 Sales 260000 Selling and Administrative expenses 148000 Account Receivable 650000 6% One year Notes Receivable 75000 Account Receivable 198850 Ending Cash balance 385850 1233850 1233850 Account Receivable Date Account Title Debit Date Account Title Credit Beginning Balance 128000 Cash 650000 Sales 920000 Cash 198850 Sales 198850 Allowances for Doubtful accounts 7800 Ending Blance 390200 1246850 1246850 Allowances for Doubtful accounts Date Account Title Debit Date Account Title Credit Accounts Receivable 7800 Beginning Balance 19500 Income Summary 2500 Ending Balance 9200 19500 19500 Inventory Date Account Title Debit Date Account Title Credit Beginning Balance 431000 Cost of Goods Sold 435000 Accounts Payable 595000 Cost of Goods Sold 166000 Cost of Goods Sold 102000 Ending Balance 323000 1026000 1026000 Accounts Payable Date Account Title Debit Date Account Title Credit Cash 625000 Beginning Balance 98000 Ending Balance 68000 Inventory 595000 693000 693000 Common stock Date Account Title Debit Date Account Title Credit Ending Balance 465000 Beginning Balance 465000 Retained Earnings Date Account Title Debit Date Account Title Credit Ending Balance 635787.5 Beginning Balance 101500 Income Summary 530350 Interest Revenue 3937.5 635787.5 635787.5 Cost of Goods Sold Date Account Title Debit Date Account Title Credit Inventory 435000 Income Summary 703000 Inventory 166000 Inventory 102000 703000 703000 Selling and Administrative expenses Date Account Title Debit Date Account Title Credit Cash 148000 Income Summary 148000 Credit Card charges Date Account Title Debit Date Account Title Credit Sales 6150 Income Summary 6150 Sales Date Account Title Debit Date Account Title Credit Income Summary 1385000 Account Receivable 920000 Cash 260000 Credit Card charges 6150 Account Receivable 198850 1385000 1385000 6% One year Notes Receivable Date Account Title Debit Date Account Title Credit Cash 75000 Ending Balance 75000 Interest Receivable Date Account Title Debit Date Account Title Credit Interest Revenue 3937.5 Ending Balance 3937.5 Interest Revenue Date Account Title Debit Date Account Title Credit Retained Earnings 3937.5 Interest Revenue 3937.5 Income Summary Date Account Title Debit Date Account Title Credit Cost of Goods Sold 703000 Sales 1385000 Credit Card charges 6150 Allowances for Doubtful accounts 2500 Selling and Administrative expenses 148000 Retained Earnings 530350 1387500 1387500 Statement of Changes of Stock holders equity Beginning Ending Change % of change Common stock 465000 465000 0 0 Retained Earnings 101500 635787.5 534287.5 5.263916 BalanceSheet Cash $     385,850.00 Account Receivable $     390,200.00 Interest Receivable $          3,937.50 Inventory $     323,000.00 6% One year Notes Receivable $       75,000.00 Total Assets $ 1,177,987.50 Accounts Payable $       68,000.00 Allowances for Doubtful accounts $          9,200.00 Common stock $     465,000.00 Retained Earnings $     635,787.50 Total Liabilities $ 1,177,987.50

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