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The Queen of the Snows started a business, Winter Carnival Co.,a company that specializes...

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Accounting

The Queen of the Snows started a business, Winter Carnival Co.,a company that specializes in merchandise for ice-fishing,snow-sliding, treasure-hunting and other winter activities. In2017, the company had the following beginning balances (indollar).

Beginning Balances:

Accounts Receivable: 30,000

Allowance for Doubtful Accounts: 3,000

Cash: 50,000

Inventory: 220,000

Prepaid Advertisement: 36,000

Salary Payable: 3,000

Accounts Payable: 70,000

Accumulated Depreciation: 10,000

Common Stock: 100,000

Machine: 50,000

Retained Earnings: 200,000

During 2017, the following transactions occurred.

Winter Carnival borrowed $500,000 on February 1, 2017 from alocal bank, on a 2% note for 5 years. Winter Carnival would payinterest semi-annually on each August 1 and February 1.

Winter Carnival delivered merchandise and earned sales revenue,totaled $300,000, of which $250,000 was on credit. Cost, to WinterCarnival Co., of the merchandise sold, totaled $150,000.

In addition, Winter Carnival signed a sales contract with acustomer, Mini-Soda Company to deliver a total of $60,000merchandise in January 2018. Winter Carnival collected $18,000 cashin advance from this customer on October 17, 2017.

Winter Carnival acquired additional merchandise, totaled$100,000, of which $90,000 was on account.

Winter Carnival paid $80,000 on its accounts payable to itssuppliers.

Winter Carnival collected a total of $230,000 on its accountsreceivable from its various customers.

Winter Carnival paid its employees $90,000 cash for theirsalary. At the end of year 2017, the company still owed $2,500salary payable to its employees.

Winter Carnival incurred insurance expenses of $6,000, all paidin cash in 2017.

The following information was also available during 2017 forWinter Carnival Co.

9.

Its ā€˜prepaid advertisementā€™ had 18 months remaining at thebeginning of the year 2017.

The existing machine had an estimated life of 10 years with noresidual value and had been depreciated using the straight-linemethod.

Its bad debt expense was estimated to be 10% of its outstandingA/R on 12/31/2017.

The income tax rate was 21% for Winter Carnival and the companywould pay its income tax in the first quarter of 2018.

Required:

Based on above transactions, prepare journal entries andadjusting entries in 2017 for Winter Carnival.

Set up T-accounts and post your journal entries and adjustingentries to T-accounts. (A kind reminder: Donā€™t forget the beginningbalances.)

Prepare a pre-closing trial balance, as of December 31,2017.

Prepare an income statement, in a good format, for the yearended December 31, 2017 for Winter Carnival.

Prepare a statement of retained earnings, in a good format, forthe same period for Winter Carnival.

Prepare a balance sheet, in a good format, as of December 31,2017 for Winter Carnival.

Prepare closing entries and a post-closing trial balance, as ofDecember 31, 2017.

Answer & Explanation Solved by verified expert
4.5 Ratings (1118 Votes)
Journal entries in the books of Winter Carnival Co for the year 2017 SNo Date Particulars Debit Credit 1 01012017 Accounts Receivable 30000 Cash 50000 Inventory 220000 Prepaid Advertisement 36000 Machine 50000 Allowance for doubtful accounts 3000 Salary Payable 3000 Accounts Payable 70000 Accumulated Depreciation 10000 Common Stock 100000 Retained Earnings 200000 Entry for recording all the opening balances in Books for the current year 2 01022017 Cash 500000 2 Loan 500000 Entry for recording the borrowing 3 End of the year Cash 50000 Accounts Receivable 250000 Sales 300000 Entry for recording sales 4 End of the year Cost of Goods Sold 150000 Inventory 150000 Entry for recording consumption of stock 5 17102017 Cash 18000 Advance for Sales 18000 Entry for recording advance obtained against a sales contract 6 Machine 100000 Cash 100000 Entry for acquiring an additional machinery 7 Accounts Payable 80000 Cash 80000 Entry for payment made to suppliers 8 Cash 230000 Accounts Receivable 230000 Entry for recording collections from customers 9 Salary 89500 Salary Payable 3000 Cash 90000 Salary Payable 2500 Entry for    See Answer
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In: AccountingThe Queen of the Snows started a business, Winter Carnival Co.,a company that specializes in...The Queen of the Snows started a business, Winter Carnival Co.,a company that specializes in merchandise for ice-fishing,snow-sliding, treasure-hunting and other winter activities. In2017, the company had the following beginning balances (indollar).Beginning Balances:Accounts Receivable: 30,000Allowance for Doubtful Accounts: 3,000Cash: 50,000Inventory: 220,000Prepaid Advertisement: 36,000Salary Payable: 3,000Accounts Payable: 70,000Accumulated Depreciation: 10,000Common Stock: 100,000Machine: 50,000Retained Earnings: 200,000During 2017, the following transactions occurred.Winter Carnival borrowed $500,000 on February 1, 2017 from alocal bank, on a 2% note for 5 years. Winter Carnival would payinterest semi-annually on each August 1 and February 1.Winter Carnival delivered merchandise and earned sales revenue,totaled $300,000, of which $250,000 was on credit. Cost, to WinterCarnival Co., of the merchandise sold, totaled $150,000.In addition, Winter Carnival signed a sales contract with acustomer, Mini-Soda Company to deliver a total of $60,000merchandise in January 2018. Winter Carnival collected $18,000 cashin advance from this customer on October 17, 2017.Winter Carnival acquired additional merchandise, totaled$100,000, of which $90,000 was on account.Winter Carnival paid $80,000 on its accounts payable to itssuppliers.Winter Carnival collected a total of $230,000 on its accountsreceivable from its various customers.Winter Carnival paid its employees $90,000 cash for theirsalary. At the end of year 2017, the company still owed $2,500salary payable to its employees.Winter Carnival incurred insurance expenses of $6,000, all paidin cash in 2017.The following information was also available during 2017 forWinter Carnival Co.9.Its ā€˜prepaid advertisementā€™ had 18 months remaining at thebeginning of the year 2017.The existing machine had an estimated life of 10 years with noresidual value and had been depreciated using the straight-linemethod.Its bad debt expense was estimated to be 10% of its outstandingA/R on 12/31/2017.The income tax rate was 21% for Winter Carnival and the companywould pay its income tax in the first quarter of 2018.Required:Based on above transactions, prepare journal entries andadjusting entries in 2017 for Winter Carnival.Set up T-accounts and post your journal entries and adjustingentries to T-accounts. (A kind reminder: Donā€™t forget the beginningbalances.)Prepare a pre-closing trial balance, as of December 31,2017.Prepare an income statement, in a good format, for the yearended December 31, 2017 for Winter Carnival.Prepare a statement of retained earnings, in a good format, forthe same period for Winter Carnival.Prepare a balance sheet, in a good format, as of December 31,2017 for Winter Carnival.Prepare closing entries and a post-closing trial balance, as ofDecember 31, 2017.

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