Reference no: EM131306818

Comprehensive Problem 1

Morgan Company's balance sheet at December 31, 2016, is presented below.

Morgan Company
Balance Sheet
December 31, 2016

Cash	$30,000	Accounts Payable	$12,250
Inventory	3050	Interest Payable	300
Prepaid Insurance	6,084	Notes Payable	60,000
Equipment	38,520	Owner's Capital	32,554
	$105,104		$105,104

During January 2017, the following transactions occurred. (Morgan Company uses the perpetual inventory system.)

1. Morgan paid $300 interest on the note payable on January 1, 2017. The note is due December 31, 2018.

2. Morgan purchased $240,000 of inventory on account.

3. Morgan sold for $489,000 cash, inventory which cost $263,000. Morgan also collected $31,785 in sales taxes.

4. Morgan paid $236,000 in accounts payable.

5. Morgan paid $16,500 in sales taxes to the state.

6. Paid other operating expenses of $20,500,

7. On January 31, 2017, the payroll for the month consists of salaries and wages of $58,500. All salaries and wages are subject to 7.65% FICA taxes. A total of $8,700 federal income taxes are withheld. The salaries and wages are paid on February 1.

Adjustment data:

8. Interest expense of $300 has been incurred on the notes payable.

9. The insurance for the year 2017 was prepaid on December 31, 2016.

10. The equipment was acquired on December 31, 2016, and will be depreciated on a straight-line basis over 5 years with a $3,060 salvage value.

11. Employer's payroll taxes include 7.65% FICA taxes, a 5.4% state unemployment tax, and an 0.8% federal unemployment tax.

(a) Prepare journal entries for the transactions listed above and the adjusting entries. (Credit account titles are automatically indented when amount is entered. Do not Indent manually. Round answers to 0 decimal places, e.g. 5,275.)

(b) Prepare an adjusted trial balance at January 31, 2017. (Round answers to 0 decimal places, e.g. 5,275.) Prepare an income statement. (Round answers to 0 decimal places, e.g. 5,275.)

(c) Prepare an owner's equity statement for the month ending January 31, 2017. (Round answers to 0 decimal places, e.g. 5,275.)

(d) Prepare a classified balance sheet as of January 31, 2017. (List current assets in order of liquidity. Round answers to 0 decimal places, e.g. 5,275.)

Comprehensive Problem 2

Hassellhouf Company's trial balance at December 31, 2017, is presented below. All 2017 transactions have been recorded except for the items described below.

	Debit	Credit
Cash	$27,500
Accounts Receivable	35,200
Notes Receivable	8,400
Interest Receivable	0
Inventory	36,400
Prepaid Insurance	3,000
Land	20,400
Buildings	132,000
Equipment	62,000
Patents	10,800
Allowance for Doubtful Accounts		$550
Accumulated Depreciation-Buildings	44,000
Accumulated Depreciation-Equipment		24,800
Accounts Payable		27,500
Salaries and Wages Payable		0
Unearned Rent Revenue		4,200
Notes Payable (due In 2018)		11,000
Interest Payable		0
Notes Payable (due after 2018)		35,000
Owners Capital		101,850
Owner's Drawings	12,000
Sales Revenue		901,000
Interest Revenue		0
Rent Revenue		0
Gain on Disposal of Plant Assets		0
Bad Debts Expense	0
Cost of Goods Sold	636,000
Depreciation Expense	0
Insurance Expense	0
Interest Expense	0
Other Operating Expenses	60,200
Amortization Expense	0
Salaries and Wages Expense	106,000
Total	$1,149,900	$1,149,900

Unrecorded transactions:

1. On May 1, 2017, Hassellhouf purchased equipment for 521,000 plus sates taxes of $600 (all paid In cash).
2. On July 1, 2017, Hassellhouf sold for $3,500 equipment which originally cost $5,000. Accumulated depredation on this equipment at January 1, 2017, was $1,900; 2017 depredation prior to the sale of the equipment was $450.
3. On December 31, 2017, Hasselihouf sold on account $5,500 of inventory that cost $3,850.
4. Hassellhouf estimates that uncollectible accounts receivable at year-end Is $3,800.
5. The note receivable Is a one-year, 8% note dated April 1, 2017. No Interest has been recorded.
6. The balance in prepaid insurance represents payment of a $3,000 6-month premium on September 1, 2017.
7. The building is being depreciated using the straight-line method over 30 years. The salvage value is $31,800.
8. The equipment owned prior to this year Is being depredated using the straight-line method over 5 years. The salvage value is 10% of cost.
9. The equipment purchased on May 1, 2017, is being depreciated using the stralght-Sne method over 5 years, with a salvage value of $1,800.
10. The patent was acquired on January 1, 2017, and has a useful life of 10 years from that date.
11. Unpaid salaries and wages at December 31, 2017, total $4,800.
12. The unearned rent revenue of $4,200 was received on December 1, 2017, for 3 months' rent.
13. Both the short-term and tong-term notes payable are dated January 1, 2017, and carry a 9% interest rate. All Interest is payable In the next 12 months.

(a) Prepare journal entries for the transactions listed above. (Credit account titles are automatically indented when amount is entered. Do not Indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

(b) Prepare an updated December 31, 2017, trial balance. (Combine the amounts of current and non-current portion of Notes Payable. Do not record separately.)

(c1)  Prepare a 2017 income statement.

(c2)  Prepare a 2017 an owner's equity statement. (List items that increase owner's equity first.)

(d) Prepare a December 31, 2017, classified balance sheet. (List Current Assets in order of liquidity. List Property, Plant and Equipment in the order of Land, Buildings and Equipment.)