Klinger Corporation Balance Sheet and Adjusting

KLINGER CORPORATION

Balance Sheet

December
31, 2013

Cash

$ 24,600

Accounts payable

$ 25,600

Accounts receivable

45,500

Common stock ($10 par)

80,000

Allowance for doubtful accounts

(1,500)

Retained earnings

127,400

$233,000

Supplies

4,400

Land

40,000

Buildings

142,000

Accumulated depreciation—buildings

(22,000)

$233,000

During 2014, the following transactions occurred.

1. 

On January 1, 2014, Klinger issued 1,200 shares of $40
par, 7% preferred stock for $49,200.

2. 

On January 1, 2014, Klinger also issued 900 shares of
the $10 par value common stock for $21,000.

3. 

On February 1, 2014, Klinger performed services for
$320,000 on account.

4. 

On April 1, 2014, Klinger collected fees of $36,000 in
advance for services to be performed from April 1, 2014 to March 31, 2015.

5. 

On May 1, 2014, Klinger collected $276,000 from
customers on account.

6. 

On June 1, 2014, Klinger bought $35,100 of supplies on
account.

7. 

On July 1, 2014, Klinger paid $32,200 on accounts
payable.

8. 

On August 1, 2014, Klinger reacquired 400 shares of its
common stock on June 1, 2014, for $28 per share.

9. 

On September 1, 2014, Klinger paid other operating
expenses of $188,200.

10. 

On December 31, 2014, Klinger declared the annual
preferred stock dividend and a $1.20 per share dividend on the outstanding
common stock, all payable on January 15, 2015.

11. 

On December 31, 2014, an account receivable of $1,700
which originated in 2013 is written off as uncollectible.

Adjustment data:

1. 

A count of supplies indicates that $5,900 of supplies
remain unused at year-end. (Hint:
You may want to use the T-account to determine ending balance.)

2. 

Recorded earned revenue from item 4 above. (Hint: Pay attention to the date.)

3. 

The allowance for doubtful accounts should have a
balance of $3,500 at year end. (Hint:
Don’t forget the beginning balance in the account.)

4. 

Depreciation is recorded on the building on a
straight-line basis based on a 30-year life and a salvage value of $10,000.

5. 

The income tax rate is 30%. (Hint: Prepare the
income statement up to income before taxes and multiply by 30% to compute
the amount.)

Instructions

1. 
Prepare journal entries for the transactions
listed above.

2. 
Enter the 2013 year-end balances in the ledger
accounts and post the journal entries to the ledger accounts.

3. 
Prepare a trial balance on December 31, 2014.

4. 
Journalize adjusting entries based on
adjustment data.

5. 
Prepare an adjusted trial balance at
December 31, 2014.

6. 
Prepare an income statement,
retained earnings statement, and statement of cash flow (using indirect method)
for the year ending December 31, 2014, and a classified balance sheet as of
December 31, 2014.

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