Allowance for Uncollectible

Acquiring Long term Asset

Depreciation Methods: Straight-Line, Activity-Based
Sale of Long term Asset
Ending Inventory Calculation

Example 1: Fake Inc. began the year with $85,000 of Inventory on hand.
During the year, $320,000 in merchandise (before discount) was purchased
on account with credit terms of 1/15, n/45. All discounts were taken. Fake
paid incoming freight charges of $10,000. Cost of goods sold for the year
was $340,000. What is ending inventory?

Example 2: Fake Inc. began the year with $85,000 of Inventory on hand.
During the year, $320,000 in merchandise (before discount) was purchased
on account with credit terms of 1/15, n/45. No discount was taken. Fake
paid incoming freight charges of $10,000. Cost of goods sold for the year
was $340,000. What is ending inventory?
Inventory Costing Methods: FIFO, LIFO, Weighted-
Avg
Stock related Journal Entries
Journal Entries
• Instructions: Prepare all the necessary journal entries for Frodo Inc. during the year 2022 based on the information provided below. The end of
the accounting/fiscal period is December 31, 2022.
1. Frodo Inc. paid in advance for 1 year of rent on March 31 totaling $36,000.
2. Frodo Inc. purchased Equipment on April 1 for $20,000 in cash and a $80,000 in Notes Payable.
3. On April 1, Frodo Inc. received $22,000 in advance to provide one year of monthly services.
4. On May 14th Frodo Inc. purchased inventory for $14,000 on account.
5. On June 4th, Frodo, Inc. paid the supplier for the purchase of inventory from transaction 4.
6. On June 7th, Frodo Inc. pays $50,000 in salaries owed to its employees.
7. On July 12th, Frodo offers a $4,000 internship contract for the spring of next year to a student. If he accepts the offer, he will report to work on
Jan 1st of next year.
8. On August 31st, Frodo Inc. purchased $8,000 of supplies.
9. Gandalf Co. paid Frodo Inc. $1500 on Sept 15th for services that Frodo, Inc. will providing on October 1st onward.
10. On October 1st, Frodo, Inc. performed $500 of the services for Gandalf Co. from transaction 9 above.
11. On October 7th, Frodo performed the remaining services for Gandalf Co. from transaction 9 above.
12. On November 1st, Frodo Inc. provided services worth $750 on account for Took Inc.
13. On November 10th, Frodo Inc. collected the $750 it was owed on account by Took Inc.
14. On December 22nd, Frodo Inc. bid on contracts for $30,000 of services to be performed in March of next year if accepted.
• Adjusting entries on 12/31/2022:
1. As of December 31, there were $8,000 of employees' salaries that had not been paid for two weeks of work in December.
2. Prepare the adjusting entry for the rent in transaction 1 above.
3. Prepare the adjusting entry for the advanced payment in transaction 3 above.
4. A count shows that $4000 worth of supplies are left from the $8,000 purchased in transaction 8 above.
5. Depreciation on Equipment was supposed to be $5000 for the year.
6. December’s utility bill was $1,200. This bill will be paid in January of next year.
Journal Entries
1. April 1 Issue 1,000 shares of $1 par value common stock for $5,000.

2. April 1 Buy equipment with a note for $40,000. The note and 10% interest is due in 3 years.

3. April 4 Sell inventory that cost $15,000 for $20,000.

4. April 10 Provide services to customers on account for $9,000.

5. April 15 Purchase $17,000 supplies for cash

6. April 20 Pay employees $2,300 for the first half of the month.

7. April 22 Provide services to customers for $11,000 cash.

8. April 24 Pay $1,300 owed on account

9. April 25 Collect $700 for work that will begin later in the year.

10. April 26 Collect $7,100 due on account from customers.

11. April 28 Pay $12,000 for one year’s rent in advance.

12. April 29 Sell inventory that cost $7,000 for $12,000 on account.

13. April 30 Sold a building that cost $100,000 with accumulated depreciation of $25,000 for $90,000 cash.

Adjusting Entries 12/31

1) Record depreciation on the $40,000 equipment. Using the activity-based method, it is expected to last 80,000 hours with $0 salvage value. It was used for 17,000
hours this year.
2) Record the accrued interest on the April 1 $40,000 10% note.
3) Record the entry for supplies used. There are $2,000 of supplies remaining.
4) The $700 of work paid for on April 25 was completed in December.
5) Employees earned $3,000 that will be paid in January.
6) Record the rent used since it was prepaid at the end of April.
 Financial Statements – Inc. Stat., Stat. of SE, Bal. Sheet
Prepare an Income Statement, a Statement of Stockholders’ Equity, and a Classified Balance Sheet for Sauron, Inc. for the
year ended December 31, 2022 based on the following Adjusted Trial Balance.
Account Description Debit Credit
Cash $ 36,000
Accounts Receivable $ 32,000
Supplies $ 63,600
Truck $ 5,200
Land $ 146,000
Equipment $ 25,000
Accumulated Depreciation $ 5,000
Deferred Revenue $ 43,000
Accounts Payable $ 27,000
Income Tax Payable $ 16,300
Notes Payable - due in 20 yrs $ 145,000
Common Stock** $ 22,000
Retained Earnings $ 40,000
Dividends $ 6,000
Service Revenue $ 250,000
Utilities Expense $ 44,000
Rent Expense $ 45,200
Insurance Expense $ 14,000
Income Tax Expense $ 16,300
Salaries Expense $ 110,000
Interest Expense $ 5,000

**No additional common stock was sold during year.

 Financial Statements– Stat. of Cash Flows
Listed below in random order are line items to be
included in the statement of cash flows.

Purchase of equipment $220,000

Increase in inventory 30,000
Increase in prepaid rent 10,000
Payment of dividends 40,000
Depreciation expense 20,000
Increase in accounts receivable 60,000
Increase in accounts payable 10,000
Loss on sale of land 7,000
Net income 70,000
Repayment of notes payable 50,000
Cash received from the sale of land 3,000
Issuance of common stock 250,000
Prepare the statement of cash flows for CEO Consultants using the indirect method.  Cash at the beginning of
the period was $95,000; cash at the end of the period was $45,000. Also, a $100,000 building was purchased
with Common Stock. No cash was exchanged in the transaction.
Financial Statement – Multi-step Income Statement
Demo Example 1) Multi-step Income Statement. Using the information
provided, prepare a multi-step income statement. The following data were
taken from the records of Made-up Inc. for the year ended December 31,
2022.

Gross Sales Revenue $ 975,000 Rent Expense $ 6,000

Sales Returns $ 12,000 Cost of Goods Sold $ 625,000
Sales Discount $ 4,000 Interest Expense $ 37,000
Depreciation Expense $ 28,000 Salaries Expense $ 142,000
Bad Debt Expense $ 10,000 Gain from Sale of Land $ 60,000
Income Tax Expense $ 45,000 Loss from Sale of Building $ 15,000
Installment Note Amortization Schedule and Journal Entries
Bank Reconciliation and Journal Entries