a) Accounts receivable consists of the following amounts, as of July 31, 2015.
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Alfred
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$100
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Juan
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340
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Therese
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300
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Other Customers
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5,660
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Total
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$6400
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b) Marketable securities represent the following securities which are classified as available-for-sale securities. Marketable securities are carried on the books at their fair market value and the unrealized holding gains or losses are included in stockholders' equity.
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July 31, 2015
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Security
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Number
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Face value
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Cost
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Fair market value
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ABC,8% bonds
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120
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$1.000
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$120,000
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$12,400
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XYZ,8% bonds
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96
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$500
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$48,000
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$48,100
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Total marketable securities
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|
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$ 168,590
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$171,149
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Interest is received each August 31 and February 28 on the ABC bonds. Interest is received each July 31 and January 31 on the XYZ bonds.
c) Tiny, Inc., has two distinct inventory accounts. Store Supplies Inventory consists of register tape, markers, labeling supplies, display materials, and other items used in the store. Merchandise & Parts Inventory consists of items for sale to customers. All purchases of Store Supplies Inventory are on account. Store Supplies are counted at the end of each month and the account is adjusted to the appropriate ending balance.
d) All purchases of Merchandise & Parts Inventory are on account. The firm uses the gross method for recording purchases and has a policy of paying within the discount period. Tiny's suppliers generally offer a 1% cash discount. Purchase Discounts Taken are deducted from the Cost of Goods Sold on the Income Statement each month. Tiny uses perpetual inventory system with an Average cost flow assumption for its Merchandise & Parts Inventory. As of July 31, 2015, this consists of T45X Toasters, Other Appliances (for example, micro wave ovens, mixers, blenders, and waffle irons), and Appliance Parts (for example, burners, gaskets, blades and electric cords):
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T45X Toasters
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140 at $15 each
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$ 2,100
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Other Appliances
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49,790
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Appliance Parts
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4,720
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Total Merchandise & Parts Inventory
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$ 56,610
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T45X Toasters and Other Appliances become Cost of Goods Sold as they are sold in following a perpetual inventory method. Appliance Parts are used in providing appliance repair services to customers and are expensed as Parts Expense as they are used.
e) The Prepaid Insurance represents the balance of a six-month policy purchased and paid for on June 15, 2015.
F) The Land and Building were purchased 122 months ago. The Building is being depreciated on a straight line (SL) basis over 20 years and is estimated to have a salvage value of $120,000.
g) The Equipment is being depreciated using the Double-Declining Balance (DDB) method. The average life span of the Equipment is 12 years. Tiny makes a practice of taking one-half month's depreciation in the first month in which Equipment is purchased and used. (Hint: Since the various pieces of Equipment were Purchased on different dates and have different salvage values and useful lives, do not attempt to reconcile the accumulated depreciation. Depreciation for August, 2015, for the currently owned equipment is given in the adjusting entry information.)
h) Accounts Payable as of July 31,2015 , consists of:
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Samm, Inc.
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$ 7,380
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Other Suppliers
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22,000
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Total Accounts Payable
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$ 29,380
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i) The Dividends Payable, $19,2 0-*resents a cash dividend that was declared, but not paid, during July. The dividend is $ 0.50 per share-for the shares outstanding.
j) Tin's Unearned Service Revenue is from a one-year service contract that was prepaid by a customer on May 1, 2015. The contract runs for 12 months beginning on May 1, 2015.
k) Tiny's mortgage agreement calls for monthly payments of $ 3,300, which consists of one month's interest on the unpaid balance. The mortgage interest rate is 10% annually. The Mortgage Payable is basically the same as an installment note payable.
I) The common stock has a $ 5 par value and there are 105,000 shares authorized, 38,719 shares issued, and 38,500 shares outstanding on July 31, 2015.
m) Treasury stock consists of 219 shares of Tiny's common stock purchased on the open market at $35 per share.
n) All interest rates given are annual rates. Be sure to convert to monthly rates as needed.
o) Tiny's books are correct and up-to-date as of July 31, 2015. Carry all intermediate calculations of unit cost to 4 decimal places. Round all journal entries to the dollar. Do not use cents in your entries, trial balances, statements, etc. Round up for $0.50 or more, and round down for less than $0.50.
1. Tiny purchased store display equipment, Equipment, on August 1, 2015, for $27,360 on account from Other Suppliers. The Equipment is expected to have a useful life of 6 years and a $5,184 salvage value. (Do not depreciate yet; that is a month-end adjusting entry.)
2 Tiny paid $1,440 cash to have the new Equipment installed.
3 Tiny bought $20,500 of Merchandise Inventory on account, terms 1/10,n/30 in August. The Merchandise Inventory included 80 T45X Toasters at a gross cost of $15.50 each ($1,240) and Other Appliances for $11,800 from Samm, Inc., for a gross cost of $13,40. The remaining Merchandise Inventory was Other Appliances from Other Suppliers.
4. Tiny paid the cash dividend to its common stockholders. The $0.50 per share dividend had been declared in July.
5. Tiny paid the wages due to its employees at the start of August.
6. Tiny sold merchandise for $35,440 and services for $5,960. The sales tax rate is 7% and is applicable to all merchandise and services. Of the total due, Tiny collected $31,,565.. in cash and $12,733 was on account. Sales on account included the sale of 40 T45X Toasters to kanifor $1,000 plus tax, and sales of Other Appliances to Therese for $600 plus tax.
7. The cost of the merchandise sold in 6. above, other than the 40 T45X Toasters, was $20,520. (Hint: Set up an inventory subsidiary ledger record for the T45X Toasters and determine the cost of the T45X Toasters sold using the appropriate inventory cost flow assumption.)
8. The cost of Appliance Parts used in providing services to customers in 6. above was $3,245.
9. During August, the firm bought $2,460 of Appliance Parts on account, terms 1/10,n/30, from Other Suppliers.
10. Tiny issued 5,000 new shares of common stock for $41 cash per share.
11. The firm collected $6,400 on account. This included $660 from Therese, but none from Alfred or Juan.
12. Tiny paid $33,957 to suppliers including $4,851 to Samm, Inc. These amounts properly reflect the 1% cash discount taken.
13. Tiny sold an old office desk and filing cabinet, Equipment, for $150 cash. The original cost of these items was $700 and $700.of depreciation has already been taken.
14. Juan returned 6 of the T45X Toasters on credit. (Hint: Two entries are required because Tiny uses the perpetual inventory method.)
15. The 6 T45X Toasters that were returned by Juan are sent back to Samm, Inc., for credit. (Hint: Use the actual purchase price of the new T45X Toasters to determine the credit from Samm.
16. Tiny paid $4 cash to ship out the 6 T45X Toasters.
17. Tiny accrued, but did not pay, grow wages of $15,000 with the following deductions:
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Federal Income and FICA Taxes
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$ 3,750
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Michigan Income Taxes
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525
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18. The net wages from 17. above were paid to the employees.
19. Tiny accrued, but did not pay, the employer's payroll taxes of $1,050 in FICA Taxes and $21 in Unemployment Taxes. (Note: The employer matches the employee's deduction for FICA, but not federal or state income taxes, and is also responsible for the unemployment taxes.)
20. After confirming that customer (now former customer) Alfred is bankrupt and the firm will not be able to collect on his account, Alfred's account is written off. Tiny uses the allowance method to recognize uncollectible accounts.
21. Tiny reissued 200 shares of its Treasury Stock for $43 cash per share.
22. Tiny paid $820 cash for August utilities.
23. The Federal Income and FICA Taxes due to the federal government, including those due from last month, were paid. Do not include Unemployment Taxes.
24. A check for $4,800 was received from ABC Company for interest on its bonds. This includes $4,000 of Interest Receivable.
25. On August 31, 2015, Tiny issued $20,000 of 8% 5-year bonds. Semi-annual interest will be due each February 28 and August 31. Tiny received $18,600 for the bonds, reflecting a $1,400 discount.
26. Tiny made the monthly mortgage payment.
ADJUSTMENTS, AUGUST 31, 2015:
27. The Allowance for Doubtful Accounts is determined to be equal to 3.5% of the ending gross Accounts Receivable.
28. At the end of August, Tiny's Marketable Securities have the following fair market values:
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August 31, 2015
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Security
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Fair Market Value
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ABC 8% bonds
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$122,400
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XYZ 8% bonds
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48,100
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ATM Stock
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699
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Total
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$171,199
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29. A count of Store Supplies Inventory revealed that there were $1,230 in Store Supplies on hand.
30. Depreciation on the Equipment owned prior to August 1, 2015, for the month of August, 2015, was $2,180. This does not include depreciation on the equipment sold in August, nor on the new store display equipment purchased in August.
31. Wages owed at the end of August were $4500 in gross wages. Deductions from gross wages are:
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Federal Income Taxes
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$900
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Federal FICA Taxes
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270
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Michigan Income Taxes
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135
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No additional Unemployment Taxes are due at this time.
Hint: There are other required adjustments besides these items. Information for additional entries is found throughout the problem data. Read and evaluate the information carefully