Reference no: EM132782346
Question - Trail balance unadjusted December 31, 2019
Cash $25,600
Accounts receivable, 12/31/18 116,200
Inventory, 12/31/18 76,800
Investments, at cost 219,700
Furniture and Fixtures 213,200
Accumulated depreciation, 12/31/18 $105,000
Accounts payable, 12/31/18 17,000
Notes payable, due 3/31/21 200,000
Capital stock, $10 par value 50,000
Retained earnings, 12/31/2018 139,300
Sales 877,700
Cost of Goods Sold 393,800
Land improvement expense 50,000
Salaries expense 174,000
Payroll Taxes 12,400
Income tax expense 30,000
Insurance expense 10,100
Bad Debt expense 7,400
Rent expense 34,200
Utilities expense 12,600
Travel and entertainment expense 13,000
TOTALS $1,389,000 $1,389,000
Coughlan has developed plans to expand into the wholesale flower market and is in the process of negotiating a bank loan to finance the expansion. The bank is requesting 2019 financial statements prepared on the accrual basis of accounting from Coughlan. During the course of a review engagement of Coughlan, your firm, obtained the following information:
1. Amounts due from customers totaled $142,000 at 12/31/2019. During the year the company wrote off $7,400 of receivables that were deemed to be uncollectible. An analysis of the receivables revealed that an estimated 3% of the balance will probably not be collected in 2020. There were no uncollectable receivables estimated at 12/31/2018.
2. On May 1, 2019, Coughlan paid $7,800 to renew its comprehensive insurance coverage for one year. The premium on the previous one-year policy, which expired on April 30, 2019, was $6,900.
3. During 2019, Coughlan redid the parking lot at their North retail store. Coughlan paved and fenced in the lot at a cost of $50,000. The improvements were completed on July 2, 2019, and have an estimated useful life of 10 years. Depreciation on furniture and fixtures was $15,000 for 2019.
4. Coughlan is being sued for $100,000. Coughlan's attorney believes that an unfavorable outcome is reasonably possible and that the best estimate of liability is $65,000.
5. All employees are paid weekly on Friday. The average payroll is $3,000 (6 day work week) per week. Employees were last paid on Friday, December 27th, 2019 for the week ended December 21st. Although the employees did not work on Christmas Day, Coughlan pays them for the day.
6. Coughlan has made estimated tax payments of $10,000 per quarter for the first three quarters of 2019. Coughlan's estimated tax rate is 25%.
7. Coughlan took out a 2 year note payable on April 1, 2019. The note bears interest at 3%. Principal and interest are due at maturity.
8. The company had two locations and due to poor performance, they decided to discontinue operations related to the south location. This did not result in a strategic shift for Coughlan's operations. The revenue for this location (which is included in the above trial balance) amounted to $83,000 and the expenses, $91,000 (purchases $50,000, salaries $26,000 and rent $15,000). The company disposed of all assets of the south location for a loss of $10,000 ($31,000 original cost with accumulated depreciation of $17,000). The company did not yet record the disposal of their assets.
9. The investments account is comprised of two investments. One $100,000 bond was purchased at face value and Coughlan intends to hold until it matures. The interest on these bonds are 3% and is paid annually on January 31. Coughlan purchased these bonds on September 1st of the current year. The fair value of these bonds are $96,000. The other investment are shares of Google stock, which were purchased for $1,197/share. Assume the closing price of Google on 12/31/19, was $1,336/share.
Required - Prepare Journal entry, income statement, balance sheet and adjusted trial balance for Coughlan Flower Inc.