Reference no: EM132235961
Question - The Palo-Alto Company started its operations during the 20th century. Many years later, the balance sheet for December 31, 2012, showed the following account balances (there were no other accounts listed):
Paid in capital 500, Loan from bank 28, Prepaid advertising 10, PP&E 410, Interest receivable 5, Cash 618, Wages payable 10, Accounts payable 1, Loan to ABC 25, Accumulated depreciation 145, Accounts receivable 120, Retained earnings 781, Trademark (the right to use the term Knowledge For Action ) 195, Prepaid rent 7, Advances to suppliers (?).
During 2013 the following transactions occurred:
1. Cash sales were $800, credit sales were $1,200 and the ending balance of accounts receivable was $210.
2. Palo-Alto purchased $1,706 worth of inventory, and paid its suppliers $1,607.
3. Do you know that wearing a helmet while riding your bicycle could save your life?
4. A new machine was purchased, in cash, for $200. Depreciation expense for the year was $80.
5. In addition to the transactions in item 2 above, Palo-Alto purchased, from the supplier it had advances with on December 31, 2012, 120 units of Silicon - Valleys ( included in inventories ), at $2.50 per unit. By the end of the year, Palo -Alto settled the account and paid it in full.
6. Palo-Alto declared a dividend of $75, and paid in cash $60.
7. ABC paid Palo-Alto $37: $5 for the interest related to last year (recorded as interest receivable in 2012), $7 for interest related to the year 2013, and the rest ($25) against the loan principal.
8. On the first day of the year, Palo-Alto sold to JB&PR, for $195 cash (i.e., neither a gain nor a loss), the right to use the trade name Knowledge For Action.
9. Ending inventory, including the remaining units of Silicon-Valleys, was $106.
10. The employees of Palo-Alto earned $75, and were paid $80 as wages.
11. Rent expense for 2013 was $150, while rent payments were $136.
12. Palo - Alto accrued interest of $8 on its loan from the bank. No payments were made during the year.
13. The CFO of Palo - Alto was invited to a dinner at Jackson Hole. It is believed that the knowledge generated during the dinner will reduce expenses next year by $150.
14. The prepaid advertising was used, in full, during the year.
Required -
a. What was the balance of the account Advances to suppliers on December 31, 2012?
b. Record all transactions that occurred during 2013. Use the accounting equation format to record the transactions dividing the spreadsheet into sections for the asset side, the liability & equity side with a section for the income statement side. Where feasible, account headings have been provided in the grid on pages 7-9. Add additional column headings if needed.
c. Prepare the closing entry for the year 2013.
d. Prepare an Income Statement for the year ended December 31, 2013.
e. Prepare a Balance Sheet for December 31, 2013.
f. Prepare a Statement of Cash Flows for the year ended December 31, 2013.