Coop-Mart Corporation prepares quarterly financial statements. The balance sheet at

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Coop-Mart Corporation prepares quarterly financial statements. The balance sheet at 12/31/11 is presented below.

 

 

Balance Sheet

 

 

 

12/31/2011

 

 

Cash

$24,300

 

Accounts payable

$22,370

Accounts receivable

22,400

 

Common stock

85,000

Allowance for doubtful accounts

(1,200)

 

Retained earnings

23,130

Land

20,000

 

 

 

Equipment

30,000

 

 

 

Accumulated depreciation - equipment

(20,000)

 

 

 

Building

70,000

 

 

 

Accumulated depreciation - building

(15,000)

 

 

 

 

$130,500

 

 

$130,500

 

 

 

 

 

 

During the first quarter of 2012 the following transactions occurred:

 

1.        Performed services for $140,000 on account.

 

2.        On 2/1/12, collected fees of $12,000 in advance.  $1,000 worth of services are to be performed each month from 2/1/12 to 1/30/13.

 

3.        On 2/1/12, purchased equipment for $15,000 plus sales taxes of $750.  $3,000 cash was paid with the remaining balance on account.  Check #455 was used.

 

4.        Collected $133,000 on 3/5/12 from customers on account.

 

5.        Paid $16,370 on accounts payable.  Check #456 was used.

 

6.        Paid operating expenses of $97,500.  Check #457 was used.

 

7.        Acquired a patent with a 10-year life for $9,600 cash on 3/1/12.  Check #458 was used.

 

8.        Wrote off a receivable of $200 for a customer who went bankrupt.


9.        On 3/31/12, Coop-Mart Corp. sold for $2,620 cash equipment which originally cost $13,000.  It had an estimated life of 5 years and salvage of $2,000.  It had an estimated life of 5 years and a salvage of $2,000.  Accumulated depreciation as of 12/31/2011 was $8,000 using the straight line method.  (1) Record depreciation on the equipment sold, then (2) record the sale. 

 

Adjusting Journal Entries:

10.     AJE 3/31/2012:  Record revenue earned from item 2 above.

 

11.     AJE:  At 3/31/2012, $26,000 of Accounts Receivable is not yet due. The bad debt percentage for these current receivables is 4%.  The remaining balance in Accounts Receivable is past due. The bad debt percentage for these receivables is 23.75%.  Record bad debt expense.

HINT: You will need to calculate the balance in accounts receivable before calculating bad debt expense.

 

12.     AJE:  Record depreciation as of 3/31/12.  The new equipment purchased in February is being depreciated using the double declining balance method over 5 years.   The equipment has an estimated salvage value of $1,000.  The equipment that was on the books on 12/31 that is still owned by Coop-Mart is being depreciated over a 10 year life using straight line with no salvage value.

 

13.     AJE:  Depreciation is recorded on the building on a straight-line basis using a 30-year life and a salvage value of $10,000.

 

14.     AJE:  Amortization is recorded on the patent.

 

15.     The company reconciles its bank statement every quarter. Information from the 12/31/11 Bank Reconciliation is provided below:

 

         Deposit in transit    12/30/11    $5,000                          

 

         Outstanding Checks     #440     $3,444

                                                   #452          333

                                                   #453          865

                                                   #454       5,845

 

The Bank statement received for the quarter ended 3/31/10 was:

Beginning balance per bank                                                              $          29,787

Deposits:  1/2/12 $5,000; 2/2/12 $12,000; 3/6/12 $133,000                     150,000

Checks:  #452 $333; #453 $865; #456 $16,370; #457 $97,500         ( 115,068)

Debit memo:  Bank service charge (Record as operating expense)   (        100)

Ending bank balance                                                                         $            64,619

 

16.     AJE:   Coop-Mart’s income tax rate is 40%. The tax will be paid when the tax return is due in April.

Hint:  Prepare the income statement up to income before taxes and multiply by 40% to compute the amount of income tax expense.

REQUIRED:  Print out the solution pages for the general journal, ledger and worksheet that follow and enter the following transactions. I suggest that you use a pencil.

  1. Enter the transactions numbered 1-9 in the general journal provided on the following pages.
  2. Enter the 12/31/11 balances in ledger accounts. Use the ledger account running balance format accounts provided on the following pages.
  3. Post the journal entries to the ledger accounts for items 1-9.
  4. Prepare an unadjusted trial balance at March 31st and enter on the worksheet. Then complete the other worksheet columns. (See below)

Worksheet requirement: Using your unadjusted trial balance above and the data for adjusting entries, prepare a 10 column worksheet similar to the one on page 196 in the chapter 4 appendix of your text.

  1. Prepare a bank reconciliation in good form.  (Item 15 above.) Use your own paper. Record the necessary AJE. 
  2. Journalize and post all other adjusting entries.  (Items 10-16)
  3. Prepare an income statement and a retained earnings statement for the quarter ended 3/31/12 and a classified balance sheet at 3/31/12. Use your own paper.  (No formatted sheets are supplied as for the other items.)
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