Perry started Perry's Carpentry Company in 2020 with the financial year ended on December 31. The financial statements of Perry’s Carpentry are as follows:
Perry's Carpentry
Income Statement
For the years ended December 31, 2020
2020
Revenue
Sales $ 133,400
Sales Returns and Allowances 2,040
Net Sales 131,360
Cost of Goods Sold 88,540
Gross Profit 42,820
Operating Expenses
Advertising 1,400
Wages and Salaries 11,590
Auto expense 1,970
Telephone 1,240
Depreciation 1,110
Utilities 1,370
Insurance 965
Interest & Bank Charges 4,380
Total Operating Expenses 24,025
Net income $ 18,795
Perry's Carpentry
Balance Sheet
For the years ended as at December 31, 2020
2020
Assets
Current Assets
Cash $ 4,670
Accounts Receivable, net 3,510
Inventory 21,000
Prepaid Insurance 200
Total Current Assets 29,380
Non-current Assets
Office Equipment 4,700
Accumulated Depreciation - Office
Equipment (130) 4,570
Vehicles 15,500
Accumulated Depreciation - Vehicles (500) 15,000
Land 50,000
Building 120,000
Total Non-current Assets 189,570
Total Assets $ 218,950
Liabilities
Current Liabilities
Accounts Payable 2,010
Total Current Liabilities 2,010
Long-Term Liabilities
Long-term bank loan -
Mortgage Payable 64,850
Total Long-Term Liabilities 64,850
Total Liabilities 66,860
Owner's Equity
G. Perry, Capital 152,090
Total Liabilities and Owner's Equity $ 218,950
Perry's Carpentry Company uses a perpetual inventory system (With FIFO cost flow method).
At the beginning of 2021, the trial balance of Perry's Carpentry Company is as follows:
Perry's Carpentry
Trial Balance
January 1, 2021
Accounts Debit Credit
Cash $ 4,670
Accounts Receivable 3,510
Inventory (200 units at $105) 21,000
Prepaid Insurance 200
Office Equipment 4,700
Accumulated Depreciation - Office Equipment 130
Vehicles 15,500
Accumulated Depreciation - Vehicles 500
Land 50,000
Building 120,000
Accounts Payable 2,010
Long-term bank loan -
Mortgage Payable 64,850
G. Perry, Capital 152,090
Total $ 219,580 $ 219,580
During 2021, Perry's Carpentry incurred transactions as follows:
(a) Perry took out a long-term bank loan of $21,400 for the business in cash. Her finance
provision is for the expansion of her business after the first year of success.
(b) Paid advertising expense of $1,530 for 2021 in cash.
(c) Purchase the 12-month insurance of $1,210 in cash
(d) Purchased 1,073 units of inventory for $107,300.
(e) Sold 400 units of inventory on account for $70,000 in cash.
(f) Purchased vehicles for $26,100 with cash.
(g) Paid Utilities $1,450; Telephone $1,070; Auto expense $2,030 in cash.
(h) Purchased office equipment for $1,420 with cash.
(i) Sold 665 units of inventory on account for $82,500.
(k) Paid wages and salaries of $10,700.
(l) Received a payment of $79,750 in cash from the customer at transaction (k)
(m) Paid the supplier $107,550 in cash for the purchase at transaction (d)
(n) Paid the mortgage $10,850 in cash (This transaction relates to the mortgage payable
account)
On December 31, 2021, Perry has additional information:
(1) The bank charged the interest and bank fees of $4,510 for the year of 2020. This
transaction had not been recorded.
(2) As of December 31, Perry had $300 of Prepaid insurance remaining.
(3) Later, after transaction (k), the customer discovered and returned 23 units of defective
goods with sales of $2,900, but no accounting entries had been performed to record this transaction.
(4) Depreciation on office equipment and vehicles are $390 and $1,000, respectively.
REQUIREMENTS
Part 1: Prepare financial statements
1. Journalize and post normal transactions [from (a) to (n)] to general ledger accounts in T-accounts.
2. Journalize and post adjusting entries in the same T accounts as requirement #1 above.
3. Prepare an adjusted trial balance as at December 31, 2021.
4. Prepare an income statement, statement of owner’s equity, and classified balance sheet for
the year ended December 31, 2021. (Tax rate: 0% - There is no tax expense).
5. Journalize and post-closing entries in the same T accounts in requirement #1 above.
6. Prepare a post-closing trial balance as at December 31, 2021.
7. Prepare the comparative financial statements including Income Statement and Balance Sheet
(also called Statement of Profit or Loss and Statement of Financial Position) for the year
ended 2020 & 2021 as the form provided in the next sheet. (Note: Office Equipment and
Vehicles are presented as net value of these assets = Cost - Accumulated Depreciation)