Question

Marmidan Mold Shop Inc. designs and builds molds for the automotive and aircraft industries. The account balances in the company’s general ledger on January 1, 2018 (first day of the annual fiscal year) were as follows (all account balances are in their normal debit or credit position):

Cash                                                                    $     3,700

Accounts receivable                                                   5,900

Supplies inventory                                                    29,300

Land                                                                        168,500  

Buildings                                                                 116,500

Accumulated depreciation, buildings                       37,500   

Equipment                                                                 58,500

Accumulated depreciation, equipment                     18,000

Accounts payable                                                      25,200

Income tax payable                                                   16,600

Interest payable                                                           4,200

Wages payable (due in 2018)                                    15,700                                          

Notes payable ($10,000 due June 30, 2019,

     balance due June 30, 2020)                                  61,500

Common shares                                                       151,500

Retained earnings, Dec. 31, 2017                              52,200         

The following transactions occurred during 2018:

1.The company provided mold design services , all on credit, for $ 210,300. In addition, the company manufactured molds for customers for $ 62,300 cash. Accounts receivable arising from the credit sales of $ 15,600 remain to be collected at December 31, 2018.

2.Inventory of $ 62,900 was purchased on credit and debited to the supplies inventory account.

3.Minor parts were purchased for $ 7,400 cash and debited to the supplies inventory account.

4.Wages payable at the beginning of 2018 were paid early in 2018. Wages were earned by employees and paid during 2018 in the amount of $ 112,000.

5.Income tax payable at the beginning of 2018 was paid early in 2018.

6.Payments of $ 73,000 were made to creditors for supplies previously purchased on credit.

7.One year’s interest at 9% was paid on the notes payable at July 1, 2018.

8. During 2018, Don Tallint, the principal shareholder, purchased a new car for his wife

    Debbie. The new car cost $ 45,000 and was paid for with personal funds in cash.

9.Property taxes were paid on the land and buildings in the amount of $ 17,000 cash.

10.Dividends were declared and paid in the amount of $ 7,200.

Information available for year end journal entries:

•Supplies inventory was counted and it was determined the supplies inventory was still on hand at yearend of $ 31,900.

•Annual depreciation on the buildings is $ 6,000.

•Annual deprecation on the equipment is $ 5,500

•Wages of $4,000 had been earned by employees but were unpaid and unrecorded at yearend.

•Interest for six months at 9% per year on the notes payable is unpaid and unrecorded at yearend.

•Income taxes of $ 16,500 were unpaid and unrecorded at year end.

Required:

1. Prepare journal entries for the transactions 1 to 10 above as required. Record your journal entries on the electronic worksheet provided. Add any new accounts to the worksheet that you think you need.

2. Prepare an income statement in worksheet format for the year ended December 31, 2018.

3.Prepare a statement of financial position in worksheet format as at December 31, 2018 .

4.Prepare closing journal entries for the year ended December 31, 2018 to close out temporary accounts.

Answer 1

1	Journal Entries for transactions occurred during 2018
Date	Description	Debit	Credit
1	Accounts receivable	$210,300
	Service revenue		$210,300
	(To record mold design services provided on account)
	Cash	$62,300
	Service revenue		$62,300
	(To record mold manufactured and sold for cash)
	Cash	$200,600
	Accounts receivable		$200,600
	(To record cash collected on account)
	(5900+210300-15600)
2	Supplies Inventory	$62,900
	Accounts payable		$62,900
	(To record inventory purchased on credit)
3	Supplies Inventory	$7,400
	Cash		$7,400
	(To record minor parts purchased on cash)
4	Wages payable	$15,700
	Cash		$15,700
	(To record wages paid for 2017)
	Wages expense	$112,000
	Cash		$112,000
	(To record wages paid for year 2018)
5	Income tax payable	$16,600
	Cash		$16,600
	(To record income tax paid for 2017)
6	Accounts payable	$73,000
	Cash		$73,000
	(TO record cash paid on account)
7	Interest expense	$1,335
	Interest payable	$4,200
	Cash		$5,535
	(To record interest paid on notes payable)
	($61500 x 9% = $5535)
8	No journal entry required as personal funds are used
9	Property taxes	$17,000
	Cash		$17,000
	(To record property taxes on land and building paid in cash)
10	Retained earnings	$7,200
	Dividend payable		$7,200
	(to record dividend declared)
	Dividend payable	$7,200
	Cash		$7,200
	(To record dividend paid)
	Year end adjustment entries
1	Supplies expenses	$67,700
	Supplies Inventory		$67,700
	(To record supplies used during the year)
2	Depreciation expense-Building	$6,000
	Accumulated Depreciation-Building		$6,000
	(To record depreciation on the building)
3	Depreciation expense-Equipment	$5,500
	Accumulated Depreciation-Equipment		$5,500
	(To record depreciation on equipment)
4	Wages expense	$4,000
	Wages payable		$4,000
	(To record wages not yet paid)
5	Interest expense	$2,768
	Interest payable		$2,768
	(to record interest on note payable for 6 months)
	(61500 x 9% x 6/12)
6	Income tax expense	$16,500
	Income tax payable		$16,500
	(To record income tax payable for 2018)
2	Income statement
	for the year ended on December 31, 2018
	Account Titles	Amount
	Service Revenue		$272,600
	Operating expenses:
	Wages expense	$116,000
	Supplies expenses	$67,700
	Depreciation expense-Building	$6,000
	Depreciation expense-Equipment	$5,500
	Property taxes	$17,000
	Total Operating expenses		$212,200
	Operating Profit		$60,400
	Non-operating expenses:
	Interest expense		$4,103
	Income before Tax		$56,297
	Income tax		$16,500
	Net Income		$39,797
3	Statement of Financial position
	as at December 31, 2018
	Assets	Amount
	Current Assets:
	Cash	$12,165
	Accounts Receivable	$15,600
	Supplies Inventory	$31,900
	Total Current Assets		$59,665
	Property, Plant and Equipment
	Land		$168,500
	Equipment	$58,500
	Accumulated Depreciation-Equipment	$23,500	$35,000
	Building	$116,500
	Accumulated Depreciation-building	$43,500	$73,000
	Total PPE		$276,500
	Total Assets		$336,165
	LIABILITIES AND STOCKHOLDERS EQUITY
	Liabilities
	Current Liabilities:
	Accounts payable		$15,100
	Wages payable		$4,000
	Income tax payable		$16,500
	Interest payable		$2,768
	Note Payable due in one year		$10,000
	Total Current Liabilties		$48,368
	Long term Liabilities
	Notes payable		$51,500
	Stockholders Equity
	Common stock	$151,500
	Retained Earnings	$84,797
	Total Stockholders Equity		$236,297
	ToTal Liabilities and Stockholder's equity		$336,165
4	Closing Entries
	Account Titles	Debit	Credit
	Service revenue	$272,600
	Income Summary		$272,600
	Income Summary	$232,803
	Wages expense		$116,000
	Supplies expenses		$67,700
	Depreciation expense-Building		$6,000
	Depreciation expense-Equipment		$5,500
	Property taxes		$17,000
	Interest expense		$4,103
	Income tax		$16,500
	Income Summary	$39,797
	Retained Earnings		$39,797