The trial balance of Pacilio Security Services, Inc. as of January 1, 2018, had
ID: 2481003 • Letter: T
Question
The trial balance of Pacilio Security Services, Inc. as of January 1, 2018, had the following normal balances.
Cash $93,708
Petty Cash 100
Accounts Receivable 22,540
Allowance for Doubtful Accts 1,334
Supplies 250
Prepaid Rent 3,600
Inventory (18 @ $285) 5,130
Land 4,000
Salaries Payable 2,100
Common Stock 50,000
Retained Earnings 75,894
During 2018 Pacilio Security Services experienced the following transactions:
Paid the salaries payable from 2017.
Purchased equipment and a van for a lump sum of $36,000 cash on January 22, 2018. The equipment was appraised for $10,000 and the van was appraised for $30,000.
Paid $9,000 on May 1, 2018, for one year’s office rent in advance.
Purchased $300 of supplies on account.
Purchased 120 alarm systems at a cost of $280 each. Paid cash for the purchase.
After numerous attempts to collect from customers, wrote off $2,350 of uncollectible accounts receivable.
Sold 115 alarm systems for $580 each. All sales were on account. (Be sure to compute Cost of Goods Sold using FIFO cost flow method).
Billed $86,000 of monitoring services for the year. Credit card sales amounted to $36,000 and the credit card company charged a 4% fee. The remaining $50,000 were sales on account.
Replenished the Petty Cash fund on June 30. The fund had $12 cash and receipts of $45 for yard mowing (use Maintenance Expense) $28 for office supplies expense, and $11 for miscellaneous expenses.
Collected the amount due from the credit card company.
Paid installers and other employees a total of $52,000 for salaries.
Collected $115,500 of accounts receivable during the year.
Paid $12,500 of advertising expense during the year.
Paid $6,800 of utilities expense for the year.
Sold the land, which was purchased in 2011, for $12,000.
Paid the accounts payable.
Paid a dividend of $10,000 to shareholders.
Adjustments
Determined that $180 of supplies were on hand at the end of the year.
Recognized the expired rent for both the old van and the office building for the year. The lease on the van was not renewed. Rent paid on March 1, 2017 for the van was $4,800. (note: you must use the beginning balance of Prepaid Rent to calculate this entry)
Recognized uncollectible accounts expense for the year using the allowance method. Pacilio estimates that 3 percent of sales on account will be not be collected.
Recognized depreciation expense on the equipment and the van. The equipment has a five-year life and a $2,000 salvage value. The van has a four-year life and a $6,000 salvage value. The company uses straight-line depreciation for both the van and the equipment.
Accrued salaries at December 31, 2018, were $1,500.
Required:
Record the above transactions in general journal form.
Post the transactions to T-accounts.
Prepare a trial balance
Prepare an income statement, a statement of changes in stockholders’ equity, and a balance sheet.
Prepare the journal entries to close the temporary accounts to retained earnings.
CHECK FIGURES
Trial Balance:
Ending Cash balance 93,380
Ending Supplies balance 180
Total Debits/Credits 297,229
Income Statement:
Gross Margin 120,410
Net Income 33,961
Statement of Changes in Stockholders’ Equity:
Ending Retained Earnings 99,855
Balance Sheet:
Total Assets 151,355
Explanation / Answer
Journal entries are shown as below:
Date Particulars L.F Amount ($) Amount ($) 1 Salaries payable 2,100 Cash 2,100 (For salaries paid) 2 Equipment 9,000 Van 27,000 Cash 36,000 (Purchased equipment and van) Equipment = 36,000*10,000/40000 Van = 36,000*30,000/40000 3 Prepaid Rent 9,000 Cash 9,000 (For advaance rent paid) 4 Supplies 300 Accounts Payable 300 (For supplies purchased) 5 Alarm system 33,600 Cash 33,600 (For alsrm system purchased) 6 Bad debt expense 2,350 Accounts receivable 2,350 (For AR witten off) 7 Accounts Receivable 66,700 Sales 66,700 (For alarm system sold) opening 18* 285 purchase 120*280 7a. Cost of goods sold 32,290 Merchandise incentory 32,290 (For cost of goods sold recorded) 8 Accounts Receivable against credit card 34,560 Credit Card expense 1,440 Accounts Receivable 50,000 Service Revenue 86,000 (For services provided) 9 Maintenance expense 45 Office supplies expense 28 Miscellaneous expense 11 cash short/over 4 Cash 88 (For petty cash fund replenished) 10 Cash 34,560 Account receivable from credit card 34,560 (For amount collected from credit card company) 11 Salaries 52,000 cash 52,000 (for salaries paid) 12 Cash 1,15,500 Accounts receivables 1,15,500 (For accounts receivable collected) 13 Advertising expense 12,500 Cash 12,500 (for advertising expense paid) 14 Utility expense 6,800 Cash 6,800 (for utility expense paid) 15 Cash 12,000 Land 4,000 Gain on sale of land 8,000 (For land sold) 16 Accounts Payable 300 Cash 300 (for accounts payable paid) 17 Dividend 10,000 Cash 10,000 (for dividend paid) 18 Supplies expense 370 Supplies 370 (For supplies expense recorded) 19 Rent expense 9,600 Prepaid Rent 9,600 (For rent recognized) Openin prepaid rent 3,600 Expired rent 9,000*8/12 20 Uncollectible account expense 3,501 Allowance for doubtful accounts 3,501 (For unclooectible expense recorded) Alarm sales 66,700 Monitoring service revenue 50,000 3% is 3501 21 Depreciation 6,650 Accumulated Depreciation 6,650 (For depreciation recorded) Equipment 9,000- 2,000 = 7,000/5 van 27,000-6,000 = 21,000/ 4 22 Salaries expense 1,500 salaries Payable 1,500 (For salaries accrued)Related Questions
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