Chapter 22 End-of-Fiscal-Period Work for a Corporation • 89
Name Date Class
22-R RECYCLING PROBLEM (LO1, 2, 3, 4, 5, 6, 7)
Journalizing adjustments, preparing financial statements, and journalizing end-of-fiscal-period
entries for a corporation
Stowe Corporation
Unadjusted Trial Balance
December 31, 20–
ACCOUNT TITLE DEBIT CREDIT
Cash 18 6 2 8 16
Petty Cash 1 0 0 00
Supplies 4 2 7 7 64
Prepaid Insurance 9 2 4 0 00
Ofce Equipment 19 2 3 7 83
Accumulated Depreciation—Ofce Equipment 5 7 4 8 60
Store Equipment 17 9 2 4 28
Employee Income Tax Payable 1 6 2 2 81
Social Security Tax Payable 1 4 0 0 06
Medicare Tax Payable 3 3 8 38
Medical Insurance Payable 4 4 3 52
Unemployment Tax Payable—State 1 9 3 25
Unemployment Tax Payable—Federal 3 0 10
Federal Income Tax Payable
Dividends Payable 5 2 8 0 00
Bonds Payable 4 9 5 0 00
90 • Recycling Problem Working Papers
22-R RECYCLING PROBLEM (continued)
Stowe Corporation
Unadjusted Trial Balance (Concluded)
December 31, 20–
ACCOUNT TITLE DEBIT CREDIT
Paid-in Capital in Excess of Par—Preferred
Purchases 988 8 0 0 78
Purchases Discount 8 6 5 7 88
Purchases Returns and Allowances 4 0 8 1 44
Advertising Expense 10 8 8 1 35
Cash Short and Over 2 0 21
Credit Card Fee Expense 5 6 0 5 71
Depreciation Expense—Ofce Equipment
Depreciation Expense—Store Equipment
Insurance Expense
Miscellaneous Expense 27 8 4 2 95
Payroll Taxes Expense 21 2 4 1 45
Rent Expense 29 7 0 0 00
TE
Chapter 22 End-of-Fiscal-Period Work for a Corporation • 91
Name Date Class
22-R RECYCLING PROBLEM (continued)
1., 3.
GENERAL JOURNAL PAGE 12
DATE ACCOUNT TITLE DOC.
NO. POST.
REF. DEBIT CREDIT
1 1
2 2
3 3
10 10
11 11
12 12
13 13
14 14
15 15
25 25
26 26
27 27
28 28
29 29
30 30
31 31
32 32
33 33
34 34
Adjusting Entries
20–
Dec. 31 Uncollectible Accounts Expense 3 7 4 2 60
31 Insurance Expense 8 0 0 0 00
Prepaid Insurance 8 0 0 0 00
31 Depreciation Expense—Office Equipment 3 6 1 6 00
Accumulated Depreciation—Office Equip. 3 6 1 6 00
31 Depreciation Expense—Store Equipment 3 3 4 0 00
Accumulated Depreciation—Store Equip. 3 3 4 0 00
22-R RECYCLING PROBLEM (continued)
2., 4.
Income Summary
Depreciation Expense—Ofce Equipment
Allowance for Uncollectible Accounts
Bal. 110.60
Bal. 3,632.00
Interest Receivable
3,742.60
Adj.
52.80
Adj.
Adj.
Adj.
1,601.49
3,616.00
Chapter 22 End-of-Fiscal-Period Work for a Corporation • 93
Name Date Class
22-R RECYCLING PROBLEM (continued)
Uncollectible Accounts Expense
Federal Income Tax Expense
Bal. 13,500.00
Bal. 16,516.82
Accumulated Depreciation—Ofce Equipment
Bal. 5,748.60
Bal. 9,364.60
Accumulated Depreciation—Store Equipment
Bal. 11,985.60
Bal. 15,325.60
3,616.00
3,340.00
Adj.
Adj.
Adj.
Adj.
3,742.60
3,016.82
94 • Recycling Problem Working Papers
22-R RECYCLING PROBLEM (continued)
5.
Adjusted Trial Balance
ACCOUNT TITLE DEBIT CREDIT
Cash 18 6 2 8 16
Petty Cash 1 0 0 00
Prepaid Insurance
Ofce Equipment
Accumulated Depreciation—Ofce Equipment
Store Equipment
Accumulated Depreciation—Store Equipment
Accounts Payable 29 5 5 6 97
Sales Tax Payable 1 6 6 2 32
Notes Payable
Interest Payable
Unearned Rent Income
Employee Income Tax Payable 1 6 2 2 81
Social Security Tax Payable 1 4 0 0 06
(Note: Adjusted trial balance is continued on next page.)
TE
Stowe Corporation
December 31, 20–
1 2 4 0 00
19 2 3 7 83
9 3 6 4 60
17 9 2 4 28
15 3 2 5 60
16 5 0 0 00
2 0 6 25
9 9 0 00
Chapter 22 End-of-Fiscal-Period Work for a Corporation • 95
Name Date Class
22-R RECYCLING PROBLEM (continued)
Adjusted Trial Balance (Concluded)
ACCOUNT TITLE DEBIT CREDIT
Paid-in Capital in Excess of Par—Preferred
Retained Earnings 95 4 6 0 78
Purchases 988 8 0 0 78
Purchases Discount 8 6 5 7 88
Purchases Returns and Allowances 4 0 8 1 44
Advertising Expense 10 8 8 1 35
Cash Short and Over 2 0 21
Credit Card Fee Expense 5 6 0 5 71
Depreciation Expense—Ofce Equipment
Depreciation Expense—Store Equipment
Insurance Expense
Interest Income
Rent Income
Gain on Plant Assets 1 0 2 1 00
Interest Expense
Loss on Plant Assets 1 5 9 4 00
Stowe Corporation
December 31, 20–
3 6 1 6 00
3 3 4 0 00
8 0 0 0 00
4 8 0 48
1 9 8 0 00
2 5 8 2 25
Totals 1793 5 4 5 24 1793 5 4 5 24
96 • Recycling Problem Working Papers
22-R RECYCLING PROBLEM (continued)
6.
Income Statement
% OF
SALES
Operating Revenue:
Sales
Less: Sales Discount
Gross Profit
Operating Expenses:
Advertising Expense
Cash Short and Over
Credit Card Fee Expense
Depreciation Expense—Office Equipment
Depreciation Expense—Store Equipment
Insurance Expense
Miscellaneous Expense
Payroll Taxes Expense
Rent Expense
Repairs Expense
Gain on Plant Assets
Total Other Income
Other Expenses:
Interest Expense
Loss on Plant Assets
Total Other Expenses
TE
Stowe Corporation
For Year Ended December 31, 20–
1486 2 4 9 49
3 8 9 0 04
497 6 7 8 06 33.8
10 8 8 1 35
2 0 21
5 6 0 5 71
3 6 1 6 00
3 3 4 0 00
8 0 0 0 00
27 8 4 2 95
21 2 4 1 45
29 7 0 0 00
4 0 6 1 97
1 0 2 1 00
3 4 8 1 48
2 5 8 2 25
1 5 9 4 00
4 1 7 6 25
Chapter 22 End-of-Fiscal-Period Work for a Corporation • 97
Name Date Class
Acceptable
%
Actual
%
Positive Result Recommended Action if
Needed
Yes No
Cost of merchandise
sold Not more than 67.0%
Gross profit on
operations Not less than 33.0%
Total operating
expenses Not more than 27.0%
22-R RECYCLING PROBLEM (continued)
7.
66.2% ✔None
33.8% ✔None
28.1% ✔Review and identify
excessive expenses so they
may be controlled.
98 • Recycling Problem Working Papers
Statement of Stockholders’ Equity
Capital Stock—Common:
$1.00 Par Value
January 1, 20–, 16,000 Shares Issued
Issued during Current Year, 10,000 Shares
$5.00 Par Value, 5%
January 1, 20–, 2,700 Shares Issued
Issued during Current Year, 0 Shares
Balance, December 31, 20–, 2,700 Shares Issued
Retained Earnings:
22-R RECYCLING PROBLEM (continued)
8.
TE
Stowe Corporation
For Year Ended December 31, 20–
16 0 0 0 00
10 0 0 0 00
13 5 0 0 00
13 5 0 0 00
Chapter 22 End-of-Fiscal-Period Work for a Corporation • 99
Name Date Class
Balance Sheet
Assets
Supplies
Prepaid Insurance
Total Current Assets
Plant Assets:
Ofce Equipment
Less Accumulated Depreciation—Office Equipment
Store Equipment
Less Accumulated Depreciation—Store Equipment
Total Plant Assets
Total Assets
Liabilities
Current Liabilities:
Accounts Payable
Sales Tax Payable
Notes Payable
Interest Payable
Unearned Rent Income
Employee Income Tax Payable
Long-term Liabilities:
Bonds Payable
Total Long-term Liabilities
Total Liabilities
Stockholders’ Equity
Capital Stock—Common
Paid-in Capital in Excess of Par—Common
Capital Stock—Preferred
Retained Earnings
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
22-R RECYCLING PROBLEM (continued)
9. Stowe Corporation
December 31, 20–
2 0 0 00
1 2 4 0 00
294 1 8 0 23
19 2 3 7 83
9 3 6 4 60 9 8 7 3 23
17 9 2 4 28
15 3 2 5 60 2 5 9 8 68
12 4 7 1 91
306 6 5 2 14
29 5 5 6 97
1 6 6 2 32
16 5 0 0 00
2 0 6 25
9 9 0 00
1 6 2 2 81
4 9 5 0 00
4 9 5 0 00
66 1 9 0 48
26 0 0 0 00
60 0 0 0 00
13 5 0 0 00
140 9 6 1 66
240 4 6 1 66
306 6 5 2 14
100 • Recycling Problem Working Papers
22-R RECYCLING PROBLEM (continued)
10.
Acceptable
%
Actual
%
Positive Result Recommended Action if
Needed
Yes No
Working capital Not less than
$200,000.00
Statement of Cash Flows
11.
$232,939.75 ✔None
Stowe Corporation
For Year Ended December 31, 20–
Cash ows from operating activities:
Cash receipts from:
Sales 1439 0 7 8 18
Interest 4 4 7 68
Interest (2 4 5 0 45)
Taxes (16 0 0 0 00)
Rent (29 7 0 0 00)
Other operating expenses (140 2 5 8 66)
Total cash payments (1446 6 8 9 28)
Net cash provided/(used) by operating activities (5 1 8 3 42)
Cash ows from investing activities:
Sale of store equipment 4 2 0 0 00
Purchase of office equipment (5 0 0 0 00)
Purchase of store equipment (1 5 0 0 00)
Net cash provided/(used) by investing activities (2 3 0 0 00)
Cash ows from financing activities:
TE
Chapter 22 End-of-Fiscal-Period Work for a Corporation • 101
Name Date Class
22-R RECYCLING PROBLEM (continued)
12.
GENERAL JOURNAL PAGE
DATE ACCOUNT TITLE DOC.
NO. POST.
REF. DEBIT CREDIT
1 1
2 2
3 3
4 4
5 5
6 6
13 13
14 14
15 15
16 16
17 17
18 18
19 19
20 20
21 21
22 22
23 23
24 24
16
Closing Entries
20–
Dec. 31 Sales 1486 2 4 9 49
Purchases Discount 8 6 5 7 88
Purchases Returns and Allowances 4 0 8 1 44
Interest Income 4 8 0 48
Rent Income 1 9 8 0 00
Advertising Expense 10 8 8 1 35
Cash Short and Over 2 0 21
Credit Card Fee Expense 5 6 0 5 71
Depreciation Expense—Office Equipment 3 6 1 6 00
Depreciation Expense—Store Equipment 3 3 4 0 00
Insurance Expense 8 0 0 0 00
Miscellaneous Expense 27 8 4 2 95
Payroll Taxes Expense 21 2 4 1 45
Rent Expense 29 7 0 0 00
Repairs Expense 4 0 6 1 97
Salary Expense 278 2 2 1 68
Supplies Expense 4 0 7 7 64
Dividends 21 1 2 0 00
102 • Recycling Problem Working Papers
22-R RECYCLING PROBLEM (concluded)
13.
GENERAL JOURNAL PAGE
DATE ACCOUNT TITLE DOC.
NO. POST.
REF. DEBIT CREDIT
1 1
2 2
3 3
8 8
9 9
10 10
11 11
12 12
13 13
14 14
15 15
16 16
17 17
18 18
19 19
20 20
21 21
22 22
23 23
24 24
25 25
26 26
27 27
28 28
29 29
30 30
31 31
32 32
33 33
17
TE
Reversing Entries
20–
Jan. 1Interest Income 5 2 80