Problem - Pinkerton Corporation's trial balance at December 31, 2010, is presented below. All 2010 transactions have been recorded except for the items described after the trial balance.
Debit Credit
Cash $ 28,000
Accounts Receivable 36,800
Notes Receivable 10,000
Interest Receivable -0-
Merchandise Inventory 36,200
Prepaid Insurance 3,600
Land 20,000
Building 150,000
Equipment 60,000
Patent 9,000
Allowance for Doubtful Accounts $ 500
Accumulated Depreciation-Building 50,000
Accumulated Depreciation-Equipment 24,000
Accounts Payable 27,300
Salaries Payable -0-
Unearned Rent 6,000
Notes Payable (short-term) 11,000
Interest Payable -0-
Notes Payable (long-term) 35,000
Common Stock 50,000
Retained Earnings 63,600
Dividends 12,000
Sales 900,000
Interest Revenue -0-
Rent Revenue -0-
Gain on Disposal -0-
Bad Debts Expense -0-
Cost of Goods Sold 630,000
Depreciation Expense-Buildings -0-
Depreciation Expense-Equipment -0-
Insurance Expense -0-
Interest Expense -0-
Other Operating Expenses 61,800
Amortization Expense-Patents -0-
Salaries Expense 110,000
Total $1,167,400 $1,167,400
Unrecorded transactions
1. On May 1, 2010, Pinkerton purchased equipment for $16,000 plus sales taxes of $800 (all paid in cash).
2. On July 1, 2010, Pinkerton sold for $3,500 equipment which originally cost $5,000. Accumulated depreciation on this equipment at January 1, 2010, was $1,800; 2010 depreciation prior to the sale of equipment was $450.
3. On December 31, 2010, Pinkerton sold for $5,000 on account inventory that cost $3,500.
4. Pinkerton estimates that uncollectible accounts receivable at year-end are $4,000.
5. The note receivable is a one-year, 8% note dated April 1, 2010. No interest has been recorded.
6. The balance in prepaid insurance represents payment of a $3,600, 6-month premium on September 1, 2010.
7. The building is being depreciated using the straight-line method over 30 years. The salvage value is $30,000.
8. The equipment owned prior to this year is being depreciated using the straight-line method over 5 years. The salvage value is 10% of cost.
9. The equipment purchased on May 1, 2010, is being depreciated using the straight-line method over 5 years, with a salvage value of $1,800.
10. The patent was acquired on January 1, 2010, and has a useful life of 9 years from that date.
11. Unpaid salaries at December 31, 2010, total $2,200.
12. The unearned rent of $6,000 was received on December 1, 2010, for 3 months rent.
13. Both the short-term and long-term notes payable are dated January 1, 2010, and carry a 10% interest rate. All interest is payable in the next 12 months.
14. Income tax expense was $15,000. It was unpaid at December 31.
Instructions -
(a) Prepare journal entries for the transactions listed above.
(b) Prepare an updated December 31, 2010, trial balance.
(c) Prepare a 2010 income statement and a 2010 retained earnings statement.
(d) Prepare a December 31, 2010, balance sheet.