Question Description     SABRINA CORPORATION                 UNADJUSTED TRIAL BALANCE                 DECEMBER 31, 2019                                                     DEBIT   CREDIT                   CASH           36,868     FV-NI Short Term INVESTMENTS       30,300     ACCOUNTS RECEIVABLE         425,755     ALLOWANCE FOR DOUBTFUL ACCOUNTS         8,400 INVENTORY           402,912     NOTES RECEIVABLE         30,000     OFFICE BUILDING         500,000     ACCUMULATED DEPRECIATION (OFFICE BUILDING)         280,000 OFFICE EQUIPMENT         120,000     ACCUMULATED DEPRECIATION (OFFICE EQUIPMENT)         0 ACCOUNTS PAYABLE             205,258 DIVIDENDS PAYABLE             7,328 NOTES PAYABLE             60,000 PREFERRED STOCK, 30,000 OUTSTANDING ON DECEMBER 31, 2019         100,000 COMMON STOCK, 100,000  OUTSTANDING ON DEC 31, 2019         185,000 RETAINED EARNINGS             280,623 SALES REVENUE             3,590,524 SALES DISCOUNTS         20,571     SALES RETURNS AND ALLOWANCES       51,259     PURCHASES           2,600,824     PURCHASES DISCOUNTS             35,678 TRANSPORTATION - IN         25,235     SALARIES EXPENSE         320,523     RENT EXPENSE         40,955     INSURANCE EXPENSE         16,456     SUPPLIES EXPENSE         25,673     GAIN ON SALE OF ASSETS OF DISCONTINUED DIVISION         13,650 ADVERTISING EXPENSE         18,860     OPERATING LOSS ON DISCONTINUED DIVISION     21,998     UTILITIES EXPENSE         28,540     CASH DIVIDENDS DECLARED -Preferred Dividends     29,732     CASH DIVIDENDS DECLARED -Common Dividends     20,000     TOTAL           4,766,461   4,766,461 NOTE: All revenue, expense, gain and loss figures above are before tax. This company uses a Periodic Inventory system.     1. There was a customer that has gone bankrupt in 2019 and will not pay his $4480 account. This has not been recorded yet.   Also, Sabrina Corp. uses the allowance method to record Bad Debts based on an estimate of 4% of ending Accounts Receivable.   2. The Office Building is depreciated at a rate of 5% of cost per year.   The Office Equipment is depreciated straight line and has a residual value of $5,000 . It was purchased on March 1, 2019 and it is estimated to have a useful life of 6 years.   3. A one year 6% note payable of $60,000 was signed on October 1, 2019.   4. On December 1, 2019, a customer signed a 5% note receivable for $30,000 due in 90 days.   5. FV- NI Short term investments have a fair market value of $32,300 on December 31, 2019. Investments need to be recorded at fair market value at year end and any gain or loss is recorded on the Income Statement.   6. The insurance expense includes : Policy A, cost of $12,700, three year term, paid in advance on April 1, 2019 AND Policy B, cost of $3,756, two year term paid in advance on June 1, 2019.   7. The company performed a year end physical count of its inventory as at December 31, 2019. The amount of inventory on hand at December 31, 2019 amounted to $421,200. Inventory is maintained on a PERIODIC basis. Therefore the year end inventory adjustment is required.     a. Prepare the Adjusting Journal Entries required for the 2019 fiscal year at December 31, 2019. b. Prepare a detailed multi-step income statement (including detailed EPS presentation) for the year ended December 31, 2019.      NOTE: Assume that the tax rate was 30%.       Also, in 2019 common stock was issued as follows: 20,000 commons shares were issued on April 1 and 30,000 commons shares were issued on August 1. The amount of common stock outstanding at the beginning of the year (January 1, 2019) was 50,000 shares.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Question Description
    SABRINA CORPORATION      
          UNADJUSTED TRIAL BALANCE      
          DECEMBER 31, 2019      
                 
                 
          DEBIT   CREDIT
                 
CASH           36,868    
FV-NI Short Term INVESTMENTS       30,300    
ACCOUNTS RECEIVABLE         425,755    
ALLOWANCE FOR DOUBTFUL ACCOUNTS         8,400
INVENTORY           402,912    
NOTES RECEIVABLE         30,000    
OFFICE BUILDING         500,000    
ACCUMULATED DEPRECIATION (OFFICE BUILDING)         280,000
OFFICE EQUIPMENT         120,000    
ACCUMULATED DEPRECIATION (OFFICE EQUIPMENT)         0
ACCOUNTS PAYABLE             205,258
DIVIDENDS PAYABLE             7,328
NOTES PAYABLE             60,000
PREFERRED STOCK, 30,000 OUTSTANDING ON DECEMBER 31, 2019         100,000
COMMON STOCK, 100,000  OUTSTANDING ON DEC 31, 2019         185,000
RETAINED EARNINGS             280,623
SALES REVENUE             3,590,524
SALES DISCOUNTS         20,571    
SALES RETURNS AND ALLOWANCES       51,259    
PURCHASES           2,600,824    
PURCHASES DISCOUNTS             35,678
TRANSPORTATION - IN         25,235    
SALARIES EXPENSE         320,523    
RENT EXPENSE         40,955    
INSURANCE EXPENSE         16,456    
SUPPLIES EXPENSE         25,673    
GAIN ON SALE OF ASSETS OF DISCONTINUED DIVISION         13,650
ADVERTISING EXPENSE         18,860    
OPERATING LOSS ON DISCONTINUED DIVISION     21,998    
UTILITIES EXPENSE         28,540    
CASH DIVIDENDS DECLARED -Preferred Dividends     29,732    
CASH DIVIDENDS DECLARED -Common Dividends     20,000    
TOTAL           4,766,461  

4,766,461

NOTE: All revenue, expense, gain and loss figures above are before tax.
This company uses a Periodic Inventory system.
 
 
1. There was a customer that has gone bankrupt in 2019 and will not pay his $4480 account. This has not been recorded yet.
 
Also, Sabrina Corp. uses the allowance method to record Bad Debts based on an estimate of 4% of ending Accounts Receivable.
 
2. The Office Building is depreciated at a rate of 5% of cost per year.
 
The Office Equipment is depreciated straight line and has a residual value of $5,000 . It was purchased on March 1, 2019
and it is estimated to have a useful life of 6 years.
 
3. A one year 6% note payable of $60,000 was signed on October 1, 2019.
 
4. On December 1, 2019, a customer signed a 5% note receivable for $30,000 due in 90 days.
 
5. FV- NI Short term investments have a fair market value of $32,300 on December 31, 2019. Investments need to
be recorded at fair market value at year end and any gain or loss is recorded on the Income Statement.
 
6. The insurance expense includes : Policy A, cost of $12,700, three year term, paid in advance on April 1, 2019
AND Policy B, cost of $3,756, two year term paid in advance on June 1, 2019.
 
7. The company performed a year end physical count of its inventory as at December 31, 2019.
The amount of inventory on hand at December 31, 2019 amounted to $421,200.
Inventory is maintained on a PERIODIC basis. Therefore the year end inventory adjustment is required.
 
 
a. Prepare the Adjusting Journal Entries required for the 2019 fiscal year at December 31, 2019.
b. Prepare a detailed multi-step income statement (including detailed EPS presentation) for the year ended December 31, 2019.

 
   NOTE: Assume that the tax rate was 30%.    
 
Also, in 2019 common stock was issued as follows:
20,000 commons shares were issued on April 1 and 30,000 commons shares were issued on August 1.
The amount of common stock outstanding at the beginning of the year (January 1, 2019) was 50,000 shares.

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