Reference no: EM132083435

Citikonk Corporation balance sheet at 12/31/15 is presented below.
Citikonk Corporation
Balance Sheet
12/31/2015

During 2016, the following transactions occurred:
1. Purchased $123,600 inventory on account. Perpetual is used.
2. Sales made on account to customers for $180,000 plus 5.5% sales tax. Cost of sales were $111,300.
3. Received $10,000 cash down payment for orders to be shipped next year.
4. Issued 10 year, $40,000 face, 8% bonds on 7/2/16 at 103. The bonds pay interest every 1/1 and 7/1.
5. Collected $160,000 on account.
6. Paid other operating expenses of $27,500.
7. Paid $121,030 on account.
8. Paid $8,000 to the state for some of the sales tax collected from customers.
9. On 1/1/16 sold equipment which cost $20,000 with accumulated depreciation of $8,500 for $4,000 cash.
10. Issued 1,100 shares of $100 par 8% preferred stock for $160,000 cash.
11. Purchased equipment on 7/1/16 for $80,000 for cash.
12. Purchased 400 shares of Citikonk common stock from a disgruntled shareholder for $40 per share.
13. Recorded wages and payroll taxes. Gross wages were $20,000, FICA tax was withheld at a 7.55% rate, federal income taxes (FIT) of $2,000 were withheld, state income taxes (SIT) of $500 were withheld.

The Federal unemployment tax (FUTA) rate is 0.9% and the state unemployment (SUTA) rate is 3.5%.

The net wage checks were given immediately to employees. The payroll taxes will be paid to the IRS and state in early January.

Requirement A:
i - Journalize 1 - 13 above
ii - Post to the ledger
iii - Prepare an unadjusted trial balance which will be used as the first 2 columns of a worksheet.
(See Requirement B.)

***Four Optional solution templates have been prepared to assist you. They can be accessed by clicking on the Solution tabs below. Use of Microsoft Excel is optional. Hand prepared solutions are also acceptable.

Requirement B: Using your unadjusted trial balance above and the following data for adjusting entries, prepare a 10 column worksheet similar to the one in the chapter 4 appendix of your text.

(a) Depreciation on equipment purchased in previous years uses straight-line, 5 year life, no salvage value For the 2016 purchase (11 above) use a useful life of 10 years, $15,000 salvage, double declining balance.

(b) Accrue bond interest payable (Premium amortization too.).

(c) The prepaid insurance relates to a policy purchased in 2015 that expires at a rate of $80 per month.

(d) The company estimates that all accounts receivable are collectible. So don't worry about bad debts.

Requirement C: Prepare a Statement of Cash Flows. Hints: In operating activities subtract gains and premium amortization.