Comprehensive Problem, cont.
Requirement 3
TOP QUALITY APPLIANCE—LONG BEACH
Bank Reconciliation
December 31, 2018
BANK BOOK
Balance, Dec. 31, 2018 $ 490,500 Balance, Dec. 31, 2018 $ 540,062
ADD: ADD:
Deposit in Transit 156,000 Interest revenue $
1,565
STORE FIXTURES
Depreciable cost = Cost − Residual value = $75,000 − $0 = $75,000
Straight-Line Depreciation Schedule—STORE FIXTURES
Depreciation for the Year
Date
Asset
Cost
Depreciable
Cost
Depreciation
Rate
Depreciation
Expense
Accumulated
Depreciation
Book
Value
Comprehensive Problem, cont.
Requirement 4, cont.
OFFICE EQUIPMENT
Double-Declining-Balance Depreciation Schedule—OFFICE EQUIPMENT
Depreciation for the Year
Date
Asset
Cost
Book
Value
DDB
Rate
Depreciation
Expense
Accumulated
Depreciation
Book
Value
1/01/18 $ 45,000 $ 45,000
12/31/18 $ 45,000 2 × (1 / 5) $ 18,000 $ 18,000 27,000
Comprehensive Problem, cont.
Requirement 5,
Date Accounts Debit Credit
Adjusting Entries
a. Insurance Expense(1) 1,800
Prepaid Insurance 1,800
b. Bad Debts Expense(2) 13,500
Allowance for Bad Debts 13,500
Comprehensive Problem, cont.
Requirement 6
TOP QUALITY APPLIANCE––LONG BEACH
Adjusted Trial Balance
December 31, 2018
Balance
Account Debit Credit
Cash $ 539,162
Petty Cash 150
Accounts Receivable 270,000
Allowance for Bad Debts $ 13,500
Merchandise Inventory 189,000
Office Supplies 210
Prepaid Insurance 1,800
Comprehensive Problem, cont.
Requirement 7
TOP QUALITY APPLIANCE—LONG BEACH
Income Statement
For Year Ended December 31, 2018
Net Sales Revenue $ 2,045,000
Cost of Goods Sold 886,000
Gross Profit 1,159,000
Operating Expenses:
Franchise Expense $ 102,250
Salaries Expense 180,000
Utilities Expense 12,650
Insurance Expense 1,800
Total Operating Expenses 357,743
Operating Income 801,257
Other Income and (Expenses)
Interest Revenue 11,098
Interest Expense (20,000)
TOP QUALITY APPLIANCE—LONG BEACH
Statement of Retained Earnings
For Year Ended December 31, 2018
Retained Earnings, January 1, 2018 $ 0
Net income for the year 792,355
792,355
Comprehensive Problem, cont.
Requirement 7, cont.
TOP QUALITY APPLIANCE—LONG BEACH
Balance Sheet
December 31, 2018
Assets
Current Assets:
Cash $ 539,162
Petty Cash 150
Accounts Receivable $ 270,000
Property, Plant, and Equipment:
Land 100,000
Building 500,000
Less: Accumulated Depreciation (15,000) 485,000
Comprehensive Problem, cont.
Requirement 7, cont.
TOP QUALITY APPLIANCE—LONG BEACH
Balance Sheet
December 31, 2018
Liabilities
Current Liabilities:
Accounts Payable $ 275,000
Interest Payable 20,000