HAMPTON CORPORATION Balance Sheet December 31, 2011 Cash $ 24,600 Accounts payab

Question

HAMPTON CORPORATION Balance Sheet December 31, 2011 Cash $ 24,600 Accounts payable $ 25,600 Accounts receivable 45,500 Common stock ($10 par) 80,000 Allowance for doubtful Retained earnings 127,400 accounts (1,500) $233,000 Supplies 4,400 Land 40,000 Buildings 142,000 Accumulated depreciation buildings (22,000) $233,000 During 2012, the following transactions occurred. 1. On January 1, 2012, Hampton issued 1,200 shares of $40 par, 7% preferred stock for $49,200. 2. On January 1, 2012, Hampton also issued 900 shares of the $10 par value common stock for $21,000. 3. Hampton performed services for $320,000 on account. 4. On April 1, 2012, Hampton collected fees of $36,000 in advance for services to be performed from April 1, 2012, to March 31, 2013. 5. Hampton collected $276,000 from customers on account. 6. Hampton bought $35,100 of supplies on account. 7. Hampton paid $32,200 on accounts payable. 8. Hampton reacquired 400 shares of its common stock on June 1, 2012, for $28 per share. 9. Paid other operating expenses of $188,200. 10. On December 31, 2012, Hampton declared the annual preferred stock dividend and a 1.20 per share dividend on the outstanding common stock , all payable on January 15, 2013 11. An account receivable of $1700 which originated in 2011 is written off as uncollectiable. Adjustment data: 1. A count of supplies indicates that $5,900 of supplies remain unused at year-end. 2. Recorded revenue earned from item 4 above. 3. The allowance for doubtful accounts should have a balanceof $3,500 at year end. 4. Depreciation is recorded on the building on astraight-line basis based on a 30-year life and a salvage value of $10,000. 5. 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.) Create the trial balance. b.) Create the closing entries

Explanation / Answer

Part A)

The adjusted trial balance is given below:

__________

Part B)

The closing entries are given as follows

Hampton Corporation Adjusted Trial Balance Debit Credit Cash (24,600+49,200+21,000+36,000+276,000-32,200-11,200-188,200) 175,200 Accounts Receivable (45,500+320,000-276,000-1,700) 87,800 Allowance for Doubtful Debts (1,500 + 3,700 – 1,700) 3,500 Land 40,000 Buildings 142,000 Supplies (4,400 + 35,100 – 33,600) 5,900 Accumulated Depreciation – Buildings (22,000 + 4,400) 26,400 Accounts Payable (25,600 + 35,100 – 32,200) 28,500 Unearned Service Revenue (36,000 – 27,000) 9,000 Income Taxes Payable 35,130 Dividends Payable (1,200*40*7% + (8,000 + 900 – 400)*1.2) 13,560 Preferred Stock (1,200*40) 48,000 Common Stock (80,000 + 9,000) 89,000 Paid-in Capital in Excess of Par - Common Stock (21,000 – 9,000) 12,000 Paid-in Capital in Excess of Par – Preferred Stock (49,200 – 48,000) 1,200 Retained Earnings (127,400 - 13,560) 113,840 Treasury Stock – Common Stock (400*28) 11,200 Service Revenue (320,000 + 27,000) 347,000 Bad Debts 3,700 Depreciation ((142,000 – 10,000)/30) 4,400 Supplies Expense 33,600 Other Operating Expenses 188,200 Income Tax Expense (117,100*30%) 35,130 Total $727,130 $727,130

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