Reference no: EM132839758

Question - After nearly destroying the city of Springfield USA because of many near nuclear melt downs caused by Homer Simpson, Mr. Burns decided to go into selling cookies. On January 2, 2020, Mr. Burn continued his Good Old Fashion Cookies Empire. The company is still a merchandise company and still uses a net perpetual inventory system.

1. Post all journal entries to the worksheet.

2. Post all adjusting journal entries to the worksheet.

3. In good form, produce a multi step income statement, statement of retained earnings, balance sheet, statement of cash flow, and bond amortization tables for Bond #1, and Bond #2 (for the life of the bonds).

Misc. Information: Mr. Smithers performed the necessary entries to get the books up to date; this included the reduction of the mortgage payable. However, you will calculate interest expense, bad debt expense, and depreciation expense. These amounts will not be given to you. Good luck and time manage appropriately. For any note/mortgage payable, you find interest expense the same way you find interest revenue.

Check Figures:

Unadjusted Net Loss: ($80,251)

Adjusted Net Loss: ($257,310)

Journal Entries:

1. January 2: After from returning from exile, Mr. Burns invested $500,000 of personal funds directly in the business to strengthen his grip on the cookie market and received preferred stock.

2. January 3: In order to keep the IRS off his trail, Mr. Burns transferred money from his personal account into a Cayman Island secret account for $10,000,000

3. January 3: In order to expand his cookie factory and be able to dump toxic waste without being impeded by the Feds, Mr. Burns bought land for cash for $400,000. The bald children in the park was drawing attention from the Environmental Protection Agency

4. January 4: Being threatening to block out the sun, Mr. Burns was able to expedite the collection of the beginning 2020 balance of Accounts Receivable

5. January 5: In order to ease his beginning of the year cash flow crunch, Mr. Burns issued Common Stock (1,000,000 shares at $2.00 per share, par value $1.00 per share)

6. February 1: In order to keep up with being 104 year old hip evil billionaire, Mr. Burns decided to purchase a new truck. The truck cost $40,000. Mr. Burns put a down payment on the truck of $10,000 and took out a note for the rest (long term). The interest rate of the note is 8%. The truck will depreciated by miles. The expected life of the truck is 100,000 miles.

7. February 20: Mr. Burns sold his delicious cookies to candy store on account $200,000. Mr. Burns offered terms 2/10, n30. The cost of merchandise sold was $100,000.

8. February 28: Mr. Burns bought cookie dough to keep the cookie assembly line going. Mr. Burns paid cash for the cookie dough $250,000.

9. March 1st. Mr. Burns reclassed $50,000 from the long term note payable to current.

10. March 5: Mr. Burns paid for the following expenses that came in: Sales Salary $70,000, Advertising Expense $50,000, and Delivery Expense $40,000. Use only one cash transaction.

11. March 6: Mr. Burns collected $30,000 of the 1/1/2020 balance of the note receivable from Mayor Quimby. The interest rate was 15% and the Note was written on July 6th, 2019.

12. March 7: The Candy Store paid Mr. Burns what they owed him on account.

13. March 15: Mr. Burns paid income tax payable owed from last year.

14. April 1: Not liking being accountable to outside shareholders, Mr. Burns decided to buy back some treasury stock. Mr. Burns bought the $1.00 per value shares back (200,000 shares) at $.50 per share.

15. April 10: Mr. Burns paid for the following expenses: Advertising $110,000, Office Salaries $60,000, Wages $30,000, and Utility Expense $10,000. Only use one entry for cash.

16. May 01: The Grocery Store bought $300,000 of cookies on account. Mr. Burns was still angry that his casino got shutdown so there were no discount terms. The cost of the inventory was $150,000.

17. June 1: Having its own cash flow crunch, The Grocery Store paid Mr. Burns $100,000 and issued a note for $200,000. Against their better judgment, they agreed to the terms of 14%.

18. June 2: Mr. Burns issued a 2:1 Stock Split.

19. June 3: Mr. Burns bought back an additional 200,000 shares of Treasury Stock at $.50 per share.

20. June 21: The following expenses accrued and are to be paid in a later month: Pension Expense $60,000, Health Insurance Expense $50,000, and Professional Fees $10,000.

21. July 1. Mr. Burns issued $500,000, 10 years (semi annual payments) coupon rate of 10%, market rate of 12%. Mr. Smithers gave this bond the code name Bond #1.

22. July 1. Mr. Burns issued $400,000 bond (Bond #2) 10 years (semi-annual payments) coupon rate of 12%, market rate of 10%.

23. September 8: Mr. Burns paid the expenses accrued on June 21.

24. October 5: The Grocery Store paid the principle of the note and the interest.

25 October 15: Mr. Burns wrote off the amount sitting in allowance for doubtful account because Abe Simpson refused to pay for the cookies he bought in 2019. Mr. Burns used $50,000 of personal funds to hire a hit squad to go after Abe Simpson.

26. November 1: After being advised by legal counsel and Mr. Smithers that killing off competition was considered murder, Mr. Burns decided to get a patent to keep from his secrets from being used by his rivals. He paid $100,000 for his patent which will be amortized for 10 years.

27. December 1: Mr. Burns bought Cookie Dough and paid for the amount up front to get a bulk (trade) discount. The amount paid is $400,000.

28. December 8: Mr. Burns bought office supplies on account from Staples for $30,000.

29. December 9 Mr. Burns sold $450,000 of cookies on account to Shelbyville. The cost of sales was $250,000.

30. December 25: Mr. Burns paid a cash dividend after being visited by the three ghosts of Christmas to the Shareholder $500,000.

31. December 31: Mr. Burns made interest payment on Bond #1. Use effective interest method.

32. December 31: Mr. Burns made interest payment on Bond #2 Use effective interest method.

Adjusting Entries:

At December 31, 2020, Mr. Burns Good Old Fashion Cookies made the following adjusting entries.

A1. Mr. Burns recorded the depreciation for the fixed assets. The truck had 40,000 miles at December 31 and has an expected life of 3 years. Round to the nearest dollar. The other assets used double-declining balance.

A2. Half of Mr. Burns Prepaid Rent Expired.

A3. After Physical Inventory Conducted: Balance in plant supplies at year end: $700. Balance in office supplies at year end: $4,000.

A4. Income Taxes accrued $50,000. This is to be paid March 15, 2020.

A5. Office Salaries accrued $20,000. Wages accrued $15,000.

A6. Mr. Burns uses the balance sheet approach to estimate how money he will lose in uncollectible accounts. Since the city of Springfield is in a serve recession, Mr. Smithers estimated for Mr. Burns that 7% of this year ending accounts receivable will be uncollectible.

A7. Two months of the patent have expired.

A8. Mr. Smithers discovered a sale on account earned by not yet recorded, $50,000. Since this amount was discovered after the estimate for uncollectible account, this amount WILL not be included in adjusting entry A6. There were no discount terms.

A9. All unearned revenue was earned (sales revenue) in 2020.

A10 Physical Inventory count results $270,000. The amount is considered immaterial and can be adjusted to Cost of Goods Sold.

Closing Entries:

C1. Close Revenues & Expenses directly to Retained Earnings.

C2. Close Cash Dividends to Retained Earnings.