Problem #1 The following is a listing of the accounts of Bob’s Baubles, Inc. at Dec 31, 2002:
Cash $35,000
Accounts Receivable10,000
Inventory (9 Baubles @ $5,000 each)45,000
Prepaid Rent 2,000
Equipment 450,000
Accumulated Depreciation 150,000
Accounts Payable 15,000
Wages Payable 12,000
Taxes Payable10,000
Common Stock (5,000 shares) 150,000
Retained Earnings 205,000
During 2003 the following transactions occurred:
Jan 1 Paid 12/31/02 accounts payable balance.
Jan 1 Borrowed $100,000. The money is to be repaid in five years. Interest on the loan is
10% and the interest is paid each December 31st.
Jan 2 Received 12/31/02 accounts receivable.
Jan 15 Purchased 20 Baubles at $6,000 each. Paid 30% down and will pay the rest later.
Feb 1 Sold 24 Baubles for $16,000 each with 40% down (cash) and the other 60% on account.
Mar 1 Paid cash for wages of $36,000.
Mar 15 Paid 2002 taxes.
May 1 Received cash from customers who bought Baubles on Feb 1, $50,000.
July 1 Paid $30,000 to creditors (see Jan 15).
July 1 Paid rent, $8,000 (rent is $2,000 per month).
July 1 Purchased a one-year insurance policy for $6,000.
Oct 1 Paid $9,000 advertising for 2003.
Nov 1 Issued 1,000 shares of common stock for $ $30,000.
Dec 31 Paid utility bill for 2003, $12,000.
Dec 31 Paid $40,000 for wages.
Dec 31 Paid interest on loan
The Company uses the FIFO inventory system
At Dec 31, 2003, Bob owed $10,000 in wages which had not yet been paid.
The equipment originally cost $450,000, had a ten year life and was expected to be worth $50,000
at the end.
The tax rate is 30% and the 2003 taxes are to be paid in 2004.
At December 31, 2003, the market price of the stock was $50 per share.
On the blank pages provided prepare all journal entries, T-accounts and the three
financial statements we have covered so far.
Remember: Form and neatness count!!