You have been given the unadjusted trial balance for Hullie & Oates Company as o
ID: 2454230 • Letter: Y
Question
You have been given the unadjusted trial balance for Hullie & Oates Company as of 12/31/13. Hullie & Oates Company prepare financial statements annually.
Your required tasks are as follows:
On the designated worksheet, prepare in journal entry form the adjusting journal entries for the following items. (Round all numbers to the nearest dollar, 0.2 points each)
On April 1, 2013 a 24-month insurance policy was purchased for $24,000.
On January 1, 2013 Hullie & Oates paid Gretsky Advertising $48,000 for three years of advertising services. Equal services are provided each year.
Hullie & Oates needed some additional storage space so on November 1, 2013 they rented a unit for an annual rate of $18,500. The entire amount was expensed when paid.
$5,800 of store supplies were purchased during the year and the asset store supplies was increased. $3,200 of these supplies were used during the year.
$7,775 of office supplies were purchased during the year and were immediately expensed. $1,250 of these supplies remained at the end of 2013.
On July 1, 2013, Hullie & Oates issued a 9-month note receivable to Shanahan Co. at an annual interest rate of 6%. Principle and interest will be paid at the end of the 9-months. The note was recorded in Notes Receivable and is the only note outstanding.
Depreciation for the year is based on the following:
Straight line depreciation
Store equipment – Assets were held for the entire year; Residual Value = $10,000; Service life is estimated to be 10 years.
Office equipment – Assets were held for the entire year; Residual Value = $7,000; Service life is estimated to be 3 years.
Sales salaries of $8,400 and office salaries of $6,500 remained unpaid at 12/31/13.
On October 1, 2013, Hullie & Oates rented a portion of one store to Twist & Chase Co. The contract was for 6 months and Hullie & Oates required the 6 months of cash upfront on October 1st. The rent is being earned equally over the next 6 months. When cash was received, unearned rent was appropriately recorded.
The note payable was outstanding the entire year and a 6.5% interest rate exists on the note. No interest has been recorded for the year.
Based on past experience, Hullie & Oates calculates bad debt expense at 1% of net sales for the year.
After the above adjusting entries are entered on the adjustment worksheet, the amounts should be linked to the adjustments column of the worksheet. Your adjustment amounts should be a formula so if you change the debit/credit amount on the adjustments worksheet, the column amount will automatically change. (1.8 points)
Complete the adjusted columns by the use of the formula. Think about the best way to do this. Your last two columns should never contain constant numbers but will include formulas only. (1 point)
Prepare a multiple-step income statement on the proper worksheet. Your Income Statement should be in good form (proper titles, etc., use examples from your book) and well formatted. Do your best designating between selling and administrative expenses. You should use formulas in all cells, not constant numbers. (That means, your income statement should be linked to the adjusted numbers on your worksheet.)
Prepare a Statement of Stockholder’s Equity on the proper worksheet. Your Statement should be formatted. You should use formulas in all cells, not constant numbers.
6. On the designated worksheet, prepare in journal entry form the closing entries for Hullie & Oates at the end of 12/31/13.
7. Prepare a Classified Balance Sheet on the proper worksheet as of 12/31/13. Your Statement should be formatted. You should use formulas in all cells, not constant numbers.
8. Complete the Ratio Tab. You should use formulas in cells.
Hullie & Oates Company End of Period Worksheet For the Year Ended December 31, 2013 Unadjusted Adjusted Account Title Trial Balance Adjustments Trial Balance DR CR DR CR DR CR Cash 36,000 - Accounts Receivable 72,850 - Allowance for Doubtful Accounts 4,000 Interest Receivable - Merchandise Inventory 160,500 - Prepaid Insurance 24,000 - Prepaid Advertising 48,000 Prepaid Rent - Store Supplies 5,800 - Office Supplies - - Note Receivable 30,000 Store Equipment 350,000 - Accumulated Depreciation - Store Equipment - 40,050 Office Equipment 125,000 - Accumulated Depreciation - Office Equipment - 17,200 Accounts Payable - 85,200 Salaries Payable - - Interest Payable - - Unearned Rent - 40,000 Note Payable (final payment due 2017) - 146,000 Common Stock - 60,000 Retained Earnings - 333,825 Dividends 25,000 - Sales - 788,350 Sales Returns and Allowances 12,800 - Sales Discounts 8,300 - Cost of Goods Sold 457,200 - Sales Salaries Expense 94,650 - Advertising Expense - Depreciation Expense - Store Equipment - - Store Supplies Expense - - Miscellaneous Selling Expense 2,600 - Office Salaries Expense 34,000 - Rent Expense 18,500 - Insurance Expense - - Depreciation Expense - Office Equipment - - Office Supplies Expense 7,775 - Miscellaneous Administrative Expense 1,650 - Rent Revenue - - Interest Revenue Interest Expense - - Bad Debt Expense - - 1,514,625 1,514,625Explanation / Answer
1) Insurance expense dr. 9000
Prepaid insurance expense dr. 15000
To bank 24000
2) Advertisement expense dr. 16000
Prepaid Advertisement expense dr. 32000
To bank 48000
3) Rent expense 3083 (18500/12*2)
to Bank 3083
4) purchase dr . 3200
to bank
5) office expense dr. 7,775
to bank 7,775
6) Depreciation a/c dr. 34,000
to store equipment 34,000
[ (3,50,000-10000)/10 years ]
7) depreciation a/c dr. 39,333
to office equipment 39,333
[ (125000-7000)/3 ]
8) sales salary a/c dr 8,400
to sales salaries outstanding a/c 8,400
9) office salary a/c dr. 6500
to office salary outstanding a/c 6500
Bad debt 7883.50 ( 788,350*1%)
To debtor 7883.50
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