Assuming AG is in the second year of operations in 2016, AG had beginning balanc

Question

Assuming AG is in the second year of operations in 2016, AG had beginning balance sheet account balances of: Cash $1,000,000; A/R $100,000; Allowance for doubtful accounts $10,000 (credit balance), Common stock $400,000; APIC $600,000; and retained earnings of $90,000. Assume all other accounts have zero balances. AG purchased inventory on credit throughout the year: On 2/1 - 10,000 units at $10/unit; On 6/1-10,000 units at $20/unit; On 12/1 -20,000 units at $15/unit. AG uses LIFO perpetual method and incorporates lower of cost or market in determining ending inventory. Assume the Market Value of ending inventory is $65,000. AG made the following sales on credit: On 2/25, AG sold 6,000 units for $60/unit. On 8/20, AG sold 12,000 units for $75/unit. On 12/15, AG sold 18,000 units for $90/unit. On 12/20 AG received a deposit of $100,000 for 1,000 units of inventory that will be delivered in January of 2017 AG collected $390,000 in cash for the first sale in 2016 and for last year's sales (2015). The amount not collected from these sales (beginning balance and February sales) has arn uncollectible rate of 50%. In December 2016, AG collected 2,020,000 from the later in the year sales. Any amount not collected is estimated to be 1% uncollectible. On January 2, AG issued 5-year bonds for $515,000 cash. The bonds have a face value of $500,000, stated rate of 10% and market rate of 9%. Interest is paid every January 1. AG uses the straight-line method of amortization. On April 1, 2016 AG purchased equipment for $300,000, paying $100,000 in cash and financing the rest through a long-term note that charges 10% interest until paid. Also in April - AG purchased $25,000 of supplies with cash. By year-end, AG had depreciation expense of $30,000, paid cash for rent (expense) of $20,000. AG invested $20,000. 10% matures in February of 2017 and the remaining matures in July. AG received $1,000 in dividends (in cash) and paid $10,000 in dividends (cash) to the owners of AG. AG paid $553,000 towards it's A/P Accrue income tax at a rate of 35%. At year-end $5,000 of supplies remained. Please prepare journal entries, Income Statement and Balance Sheet based on the above

Explanation / Answer

INVENTORY DATE PURCHASES COGS BALANCE 1-Feb 10000 10 100000 25-Feb 6000 10 60000 4000 10 40000 1-Jun 10000 20 200000 4000 10 40000 10000 20 200000 20-Aug 10000 20 200000 2000 10 20000 2000 10 20000 1-Dec 20000 15 300000 2000 10 20000 20000 15 300000 15-Dec 18000 15 270000 2000 10 20000 2000 15 30000 Total 40000 45 600000 36000 55 550000 4000 50000 Cost

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