Reference no: EM132619620

Terry Lawrence is the majority shareholder and general manager of A1 Enterprises Limited (AEL). AEL operates a kitchen supply business which caters to restaurants across the city. AEL has been in business for 15 years and has established a solid reputation for quality products and a high level of customer service.

Question 1: Record the transactions that occurred during the year 2019 on the Super-T sheet. Then create balance sheet and income statement for AEL.

The opening balances on the Super-T as of January 1, 2019 were as follows:

Cash $15,000 Accounts payable $70,000

Accounts receivable $40,000 Common stock $280,000

Inventory $80,000 Retained earnings $105,000

Plant, Property, & Equipment $475,000

Accumulated depreciation $195,000

Goodwill $40,000

The following transactions took place in 2019:

1. Total credit sales for the year were $840,000.

2. During the year AEL received $15,000 from customers as deposits against their future purchases.

3. Purchased inventory on credit with a cost of $440,000.

4. During the year, paid out $265,000 in cash for operating expenses.

5. Acquired new equipment for the store costing $145,000 with a bank loan. Half of the loan is due in 2020 and the remainder is due in 2021.

6. During the year, collected $770,000 from customers for sales initially made on credit.

7. During the year, paid interest on the bank loan of $12,000 in cash.

8. During the year, paid $418,000 for inventory bought on credit.

9. The cost of inventory sold during the year was $390,000.

10. It was believed that goodwill should be impaired by $22,000 this year.

11. At the end of the year, owed $2,000 interest on the bank loan.

12. A total of $10,000 of the customer deposits was earned during the year.

13. At the end of the year, it was determined that the company had incurred operating expenses of $14,000 but had not yet received any invoices for these costs.

14. Depreciation on plant, property, and equipment for the year was estimated to be $95,000.

15. In December, the company prepaid $40,000 of expenses for the following year.

16. It was estimated that the taxes owing for the year were $20,000. These taxes will be paid early in the following year.

17. Management declared and paid a dividend to the common shareholders for $15,000.

18. At the end of the year, it was determined that $5,000 of the accounts receivable would never be collected.

19. One customer is suing AEL for $75,000. Legal counsel for AEL believes that the suit will not be successful.