Question: Assume cash unless otherwise noted. AG received $400,000 cash from an investor for 100% (80,000 shares of 1.00 par) stock in year 1 (1/1/13). Assuming still in its first year of operations in 2013 that AG sold 20,000 units of inventory for $500,000, of which $200,000 was on credit. Assuming that AG purchased $300,000 of inventory on credit throughout the year. Assuming that AG uses the percent of sales allowance method and estimates uncollectible receivables at 5%.
During the year AG also sold and delivered $300,000 of services; ½ in cash.
- On 12/1 AG purchased equipment, land and a building. AG purchased 3 large pieces of equipment for $50,000 each on credit; and from the purchase of equipment they were forced to pay in total $5,000 in sales tax in December. They also paid $500 in freight charges and installation charges for the equipment. AG purchased and paid for land $50,000. They then paid $5,000 for the land to be cleared. They paid $5,000 to pour the foundation. Lastly, they purchased a building for $200,000 on credit. On December 28, they invested $10,000 into investments with a 30-day maturity.
- The inventory purchases were on credit (in order of purchases) 10,000 units at $10/unit, 5,000 units at $20/unit, and 20,000 units at $5/unit. AG uses FIFO method for inventory. AG incorporates the Lower of Cost or Market in determining ending inventory. Assume that the market value of the inventory suggested a value of $80,000.
- In the beginning of the year 1, on January 2, AG issued bonds with a face of 100,000, stated rate of 9%, term 4 years and received $92,000. Market Rate is 10%. Interest is paid yearly on January 1. Assume straight line amortization of discount.
- AG had general selling expenses of $10,000. Depreciation of $20,000 for building and $10,000 for equipment. AG declared a $20,000 dividend on 12/15/13 (year 1), but this will not be paid until the following year.
- Tax rate is 30% (round all amounts to the nearest dollar)
- Prepare journal entries, an Income Statement,Balance Sheet based on the above information) as of 12/31/13. Prepare closing entries.