Custom College Coasters specializes in logo-imprinted drink coasters. The company reported the following balances in its unadjusted trial balance at December 1.
The company buys coasters from one supplier. All amounts in on December 1 are owed to that supplier. The inventory on December 1 consisted of 1,000 coasters, all of which were purchased in a batch on July 10 at a unit cost of $0.50. Custom College Coasters uses the FIFO cost flow method. During December, the company entered into the following transactions. Some of these transactions are explained in greater detail below.
Dec. 1 Purchased 500 coasters on account from the regular supplier at a unit cost of $0.52, with terms of 2/10, n/30
Dec. 2 Purchased 1,000 coasters on account from the regular supplier at a unit cost of $0.55, with terms of 2/10, n/30
Dec. 15 Paid the supplier $1,600 cash on account
Dec. 17 Sold 2,000 coasters on account at a unit price of $0.90
Dec. 23 Paid employees $500, $300 of which related to work done in November and $200 for wages up to December 22
Dec. 24 Collected $1,000 from customers on account
Dec. 31 Loaded 1,000 coasters on a cargo ship to be delivered to a customer in Hawaii; sale was made FOB destination with terms of 2/10, n/30
Other relevant information includes the following:
a. Custom College Coasters has not yet recorded $200 of selling expenses incurred in December on account.
b. The company estimates that the equipment depreciates at a rate of $10 per month. One month of depreciation needs to be recorded.
c. Wages for the period from December 23 to 31 are $100 and will be paid on January 15.
d. The $600 of Prepaid Rent relates to a six-month period ending on May 31 of the next year.
e. No shrinkage or damage was discovered when the inventory was counted on December 31.
f. The company did not declare dividends and there were no transactions involving contributed capital.
g. The company has a 30 percent tax rate and has made no tax payments this year.
Required:
1. Analyze the accounting equation effects of each transaction and any adjustments required at month-end.
2. Prepare journal entries to record each transaction and any adjustments required at month-end.
3. Summarize the journal entries in T-accounts. Be sure to include the balances on December 1 as beginning account balances. Calculate ending balances and prepare a trial balance.
4. Prepare the year-end income statement, statement of shareholders’ equity, and classified balance sheet, using the formats presented in Exhibit 6.9 and Exhibit 4.11.
5. Calculate to one decimal place the and days to sell in 2014, assuming that inventory was $500 on January 1 of this year. Evaluate these measures in comparison to an of 12.0 during the previous year.
Enjoy 24/7 customer support for any queries or concerns you have.
Phone: +1 213 3772458
Email: support@gradeessays.com