Trevor Corporation\'s balance sheet at December 31, 2013, is presented below: Ca
ID: 2454698 • Letter: T
Question
Trevor Corporation's balance sheet at December 31, 2013, is presented below:
Cash-30,000 Accounts Payable - 13,750
Inventory-30,750 Interest Payable - 2,500
Prepaid Insurance- 5,600 Bonds Payable - 50,000
Equipment- 38,000 Common Stock- 25,000
------------------------ Retained earnings - 13,100
104,350 104,350
During 2014, the following transactions occured.
1. Trevor paid $2,500 interest on bonds on January 1, 2014
2. Trevor purchased $241, 100 in inventory on account
3. Trevor sold for $480,000 cash inventory which cost $265,000. Trevor also collected $28,800 sales tax.
4. Trevor paid $230,000 on accounts payable.
5. Trevor paid $2,500 interest on the bonds on July 1, 2014.
6. The prepaid insurance ($5,600) expired on July 31.
7. On August 1, Trevor paid $10,200 for insurance coverage from August 1, 2014, through July 31, 2015.
8. Trevor paid $17,000 sales tax on the state.
9. Paid other operating expenses, $91,000.
10. Redeemed the bonds on December 31, 2014, by paying $48,000 plus $2,500 interest.
11. Issued $90,000 of 8% bonds on December 31, 2014, at 103. The bonds pay interest every June 30 and December 31.
Adjustment Data:
1. Recorded the insurance expired from item 7.
2. The equipment was acquired on December 31, 2013, and will be depreciated on a straight-line basis over 5 years with a $3,000 salvage value.
3. The income tax rate is 30%. (Hint prepare the income statement up to income before taxes and multiply by 30% to compute the amount)
Instructions:
A) PREPARE JOURNAL ENTRIES FOR THE TRANSACTIONS LISTED ABOVE AND ADJSUTING ENTRIES.
B) PREPARE AN ADJUSTED TRIAL BALANCE AT DECEMBER 31, 2014.
C) PREPARE AN INCOME STATEMENT AND A RETAINED EARNINGS STATEMENT FOR THE YEAR ENDING DECEMBER 31,2014, AND A CLASSIFIED BALANCE SHEET AS OF DECEMBER 31, 2014.
(Please help me to answer A, B, and C)
7
Explanation / Answer
Answer: Journal Entries
Adjusted Trial Balance
Income Statement
Retained Earnings
Balance Sheet
1 Account Title & Explanation Debit Credit Jan 1 2014 Interest Payable 2500 Cash 2500 2 Account Title & Explanation Debit Credit Inventory 241100 Accounts Payable 241100 3 Account Title & Explanation Debit Credit Cash 508800 Sales 480000 Sales Tax Payable 28800 Account Title & Explanation Debit Credit Cost of goods sold 265000 Inventory 265000 4 Account Title & Explanation Debit Credit Accounts Payable 230000 Cash 230000 5 Account Title & Explanation Debit Credit June 30 2014 Interest on Bond 2500 Interest Payable 2500 July 1 2014 Account Title & Explanation Debit Credit Interest Payable 2500 Cash 2500 1 Account Title & Explanation Debit Credit July 31 2014 Insurance Expense 5600 Prepaid Insurance 5600 7 Account Title & Explanation Debit Credit Aug 1 2014 Prepaid Insurance 10200 Cash 10200 8 Account Title & Explanation Debit Credit Sales Tax Payable 17000 Cash 17000 9 Account Title & Explanation Debit Credit Operating Expenses 91000 Cash 91000 10 Account Title & Explanation Debit Credit Bonds Payable 50000 Interest on Bond 2500 Gain on Bond Redemption( 50000-48000) 2000 Cash 50500 11 Account Title & Explanation Debit Credit Cash :90000*(103/100) 92700 Bond Premium 2700 Bonds Payable 90000 12 Account Title & Explanation Debit Credit Insurance Expense: 10200*5/12 4250 Prepaid Insurance 4250 13 Account Title & Explanation Debit Credit Depreciation Expense(38000-3000)/5 7000 Accumulated Depreciation 7000 14 Account Title & Explanation Debit Credit Income Tax Expense 31245 Income Tax Payable 31245Related Questions
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