Question

The 2013 balance sheet of the Captain Jet Inc. is attached. During 2014, the following events occurred.

1. On January 10, sell merchandise on account to Rayms $9,600 and Fischer $8,800. Terms 2/10, n/30. Freight $100 for each sale, F.O.B. shipping point.

2. On January 12, purchase merchandise on account from Zapfel $3,000 and Liotta $2,400. Terms 1/10, n/30. Freight $120 for each sale, F.O.B. destination.

3. Receive checks, $4,000 from Longhini and $2,000 from Hall, for sales on account after discount period has lapsed.

4. On January 15, send checks to Joosten for 9,000 less 2% cash discount, and to Maida for $11,000 less 1% cash discount.

5. On January 16, issue credit of $400 to Fieber for merchandise returned.

6. Summary daily cash sales total $15,500.

7. On January 21, pay off the balances to Zapfel and Liotta for the purchases on January 12.

8. On Feburary 9, receive payment in full from Rayms and Fischer.

9. On March 1, pay rent of $6,000 for a two-year term.

10. On April 1, sell merchandise on account to Dunlap $1,600, term 2/10, n/30. Freight $80, F.O.B. shipping point.

11. Pay $400 cash for office supplies.

12. Cash dividends totaling $800 are declared on June 13 and paid to stockholders on June 23.

13. Issue a note of $120,000 to bank (one year, annual interest rate 3%) for cash.

14. On July 5, purchase merchandise from Maida $33,000, terms 3/10, n/30.

15. On July 7, issue common stock 1000 shares, $10 par, in exchange of a land with a fair market value of $15,000.

16. On July 8, return $200 of merchandise to Maida and receive credit.

17. On August 1, sell merchandise to Lachey on account $80,000, term 1/10, n/30. Freight $1,500, F.O.B. shipping point.

18. Pay off the balance to Maida on August 4.

19. On August 10, receive half of the payment from Lachey.

20. On August 14, write off $1,300 bad debt for one account, Tooket.

21. Pay utitlities expense, $10,902.

22. On August 31, Lachey pays off its balance.

23. On September 1, pay cash $7,500 to Farmington for merchandise purchased last year.

24. On October 1, pay off notes payable $110,000 and associated accrued interest $6,000, of which $1,500 was shown on the balance sheet.

25. Over the year, sales and office employees earned $45,500 in salaries and wages, of which $1,500 was still payable at the end of year.

26. An unpaid utilities bill (December, $1,250) is due on January 10 next year.

Additional Information at the end of the year:

1. Depreciation expense for the year was $14,250.

2. The company estimated that it has to pay federal income tax, $3,250.

3. After physically counting, the company decided that the ending inventories worth $40,146.

4. Based on its historical data, the company estimated that the bad debts were about 1% of net credit sales.

5. Unearned revenue is decreased by $10,000.

6. The company expenses all of the supplies purchased during the year.

7. No insurance policy is effective during the year.

8. The company used the gross method to record its purchases and sales on credit.

9. The company adopts the periodic inventory system.

Instructions:

1. Prepare journal entries for each event. (6 pts)

2. Prepare adjusting entries. (3 pts)

3. Prepare adjusted trial balance. (3 pts)

CAPTAIN JET INC.

BALANCE SHEET

DECEMBER 31, 2013

Current Assets

Cash 41,200

Notes Receivable 16,000

Accounts Receivable 41,800

Less: Allowance for Doubtful Accounts (3,000)

Inventories 40,000

Prepaid Insurance 540

Prepaid Rent 500

Total Current Assets 137,040

Non-Current Assets

Long-term Investments

Investments in held-for-maturity securities 51,000

Land held for future development 45,500

Property, Plant, and Equipment

Land 85,000

Buildings 675,000

Less: Accumulated Depreciation (187,500)

Intangible Assets

Capitalized Development Costs 8,000

Goodwill 76,000

Other Identifiable Intangible Assets 48,000

Total Non-Current Assets 801,000

Total Assets 938,040

Current Liabilities

Notes Payable 110,000

Accounts Payable 33,500

Unearned Revenues 12,000

Income Taxes Payable 8,440

Property Taxes Payable 6,600

Interest Payable 1,500

Total Current Liabilities 172,040

Non-Current Liabilities

Provisions Related to Pensions 84,000

Bonds Payable 300,000

Total Non-Current Liabilities 384,000

Total Liabilities 556,040

Stockholders' Equity

Common Stock 100,000

Preferred Stock 100,000

Paid-in-capital - Common Stock 27,500

Paid-in-capital - Preferred Stock 10,000

Retained Earnings 152,250

Accumulated Other Comprehensive Income 5,000

Less: Treasury Stock (12,750)

Total Stockholders' Equity 382,000

Total Liabilities and Stockholders' Equity 938,040

TRIAL BALANCE SHEET

Debit Credit

Cash

Notes Receivable

Accounts Receivable

Allowance for Doubtful Accounts

Inventories

Prepaid Insurance

Prepaid Rent

Investments in held-for-maturity securities

Land held for future development

Land

Buildings

Accumulated Depreciation

Capitalized Development Costs

Goodwill

Other Identifiable Intangible Assets

Salary and Wages Payable

Interest Payable

Accounts Payable

Utilities Payable

Income Tax Payable

Property Tax Payable

Notes Payable

Unearned Revenues

Provisions Related to Pensions

Bonds Payable

Common Stock

Preferred Stock

Paid-in-capital - Common Stock

Paid-in-capital - Preferred Stock

Retained Earnings

Accumulated Other Comprehensive Income

Treasury Stock

Sales Revenue

Cash Dividends

Utilities Expenses

Sales Return

Sales Discount

Interest Expenses

Salary and Wages Expenses

Supplies Expenses

Rent Expenses

Depreciation Expenses

Income Tax Expenses

Cost of Goods Sold

Bad Debt Expenses

Total *Please make sure your total debits equal your total credits

Answer 1

Answer;-

Advantage of Sachet take Discount on payment of August 10, but not take advantage of Discount on payment of September. 1

Journal entries

Date	account titles	debit	Credit
Aug 1	Account Receivable	$80,000
	Sales		$80,000
	(To record sales)
Aug 10	Cash	$39,600
	Sales discount (40000×1%)	$400
	Account Receivable		$40,000
	(To record the payment received)
Sep 1	Cash	$40,000
	Account Receivable		$40,000

FOB shipping point: cost will be paid by buyer.