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

Date Account Titles Debit Credit 1 Jan 1 2012 Cash 49200 7% Pref stock (1200*40) 48000 Additional Paid in capital-7% Preferred Stock 1200 2 Jan 1 2012 Cash 21000 Common Stock (900*10) 9000 Additional Paid in capital-Common Stock 12000 3 Accounts Receivable 320000 Service Revenue a/c 320000 4 1-Apr-12 Cash 36000 Fees received in advance (Unearned) 36000 5 Cash 276000 Accounts Receivable 276000 6 Supplies A/c 35100 Cash 35100 7 Accounts payable 32200 Cash a/c 32200 8 Treasury Stock 11200 Cash 11200 9 Operating expenses 188200 Cash 188200 10 31/12/2012 Pref dividend (48000*7%) 3360 Dividend common stock (500*1.2) 600 Dividend payable 3960 11 31/12/2012 Allowance for Doubtful Accounts 1700 Accounts receivable 1700 Adjusting Entries 12 Supplies Expense (4400+35100-5900) 33600 Supplies 33600 13 Fees received in advance (Unearned) 36000 Service Revenue a/c 36000 14 Bad debts expense (1700+3500-1500) 3700 Allowance for Doubtful debt 3700 15 Depreciation - Buildings 4400 Accumulated depreciation-Building 4400 16 Income tax expense 37830 Income tax payable 37830 A/c titles New Trial Balance Old Trial Balance Merged Trial Balance Debit Credit Debit Credit Debit Credit 7% Pref stock (1200*40) 48000 48000 Accounts payable 32200 25600 32200 25600 Accounts Receivable 42300 45500 87800 Accumulated depreciation-Building 4400 22000 26400 Additional Paid in capital-7% Preferred Stock 1200 1200 Additional Paid in capital-Common Stock 12000 12000 Allowance for Doubtful Accounts 2000 1500 3500 Allowance for Doubtful debt Bad debts expense (1700+3500-1500) 3700 3700 Cash 115500 24600 140100 Common Stock (900*10) 9000 80000 89000 Depreciation - Buildings 4400 4400 Dividend common stock (500*1.2) 600 600 Dividend payable 3960 3960 Operating expenses 188200 188200 Pref dividend (48000*7%) 3360 3360 Service Revenue a/c 356000 356000 Supplies A/c 1500 4400 5900 Supplies Expense (4400+35100-5900) 33600 33600 Treasury Stock 11200 11200 Retained earnings 127400 127400 Land 40000 40000 Buildings 142000 142000 436560 436560 256500 256500 693060 693060 Income Statement Service Revenue a/c 356000 Less Operating expenses Operating expenses 188200 Supplies Expense (4400+35100-5900) 33600 Bad debts expense (1700+3500-1500) 3700 Depreciation - Buildings 4400 229900 Income before tax 126100 Less: Tax @ 30% 37830 Income after tax 88270 Dividend common stock (500*1.2) 600 Pref dividend (48000*7%) 3360 3960 Income tfd to retained earnings 84310 Balance Sheet Asset Current Assets Cash 140100 Supplies 5900 Accounts Receivable 87800 Less Allowance for Doubtful Accounts 3500 84300 230300 Fixed Assets Land 40000 Buildings 142000 Less:Accumulated depreciation-Bldgs. 26400 115600 155600 Total Assets 385900 Liabilities and Stock holders' equity Liabilities Current liabilities Accounts payable -6600 Dividends payabe 3960 Income tax payable 37830 35190 Stockholders' Equity 7% Pref stock (1200*40) 48000 Common stock 89000 Less: treasury stock 11200 77800 Additional Paid in capital-7% Preferred Stock 1200 Additional Paid in capital-Common Stock 12000 Retained earnings 211710 Total equity 350710 385900

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