accounting 417094

1. Accrualbasis.
Grier & Associates maintains its records on the cash basis. You have been engaged to convert its cash basis income statement to the accrual basis. The cash basis income statement, along with additional information, follows:

No plant assets were sold during 2012.

Cal State San Bernardino, Dept of Accounting & Finance, Prof M. Henry Page 1

Acct 372 TR 2 4pm TAKE HOME PROBLEM as Addendum to Midterm Exam

2. Eight column work sheet.
The trial balance of Winsor Corporation is reproduced on the following page. The information below is relevant to the preparation of adjusting entries needed to both properly match revenues and expenses for the period and reflect the proper balances in the real and nominal accounts.
Instructions
As the accountant for Winsor Corporation, you are to prepare adjusting entries based on the following data, entering the adjustments on the work sheet and completing the additional columns with respect to the income statement and balance sheet. Carefully key your adjustments and label all items. (Due to time constraints, an adjusted trial balance is not required.) Round all computations to the nearest dollar.

1. (a) Winsor determined that one percent of sales will become uncollectible.

2. (b) Depreciation is computed using the straight line method, with an eight year life

and $1,000 salvage value.
(c) Salesmen are paid commissions of 10% of sales. Commissions on sales for the last week of December have not been paid.

(d)
(e)
(f)
advance, with monthly payments at $800/mo. This provision has been complied with as of Dec. 31, 2012.

The note was issued on October 1, bearing interest at 8%, due Feb. 1, 2013.

A physical inventory of supplies indicated $340 of supplies currently in stock. Provisions of a lease contract specify payments must be made one month in

Cal State San Bernardino, Dept of Accounting & Finance, Prof M. Henry Page 2

Acct 372 TR 2 4pm TAKE HOME PROBLEM as Addendum to Midterm Exam

3. Income statement and retained earnings statement.
Porter Corporation’s capital structure consists of 50,000 shares of common stock. At December 31, 2012 an analysis of the accounts and discussions with company officials revealed the following information:

Sales revenue $1,100,000
Purchase discounts 18,000
Purchases 692,000
Earthquake loss (net of tax) (extraordinary item) 35,000

Selling expenses 128,000

Cash 60,000
Accounts receivable 90,000
Common stock 200,000
Accumulated depreciation machinery 180,000
Dividend revenue 8,000
Inventory, January 1, 2012 152,000
Inventory, December 31, 2012 125,000
Unearned service revenue 4,400
Interest payable 1,000
Land 370,000
Patents 100,000
Retained earnings, January 1, 2012 290,000
Interest expense 17,000
Administrative expenses 170,000
Dividends declared 24,000
Allowance for doubtful accounts 5000
Notes payable (maturity 7/1/15) 200,000
Machinery 450,000
Materials 40,000
Accounts payable 60,000

The amount of income taxes applicable to ordinary income was $27,600, excluding the tax effect of the earthquake loss which amounted to $15,000.

Instructions

(a) Prepare a multiple step income statement. (b) Prepare a retained earnings statement.