ACCT 123 Breaking Bad Company (“BBC”)

    Breaking Bad Company
    (“BBC”)

    Date

    March 1, 2013
    On March 1 started
    business by funding with $ 1,000,000. cash in exchange for 100,000 shares of
    no par common stock

    March 31, 2013
    Paid $12,000. for an
    annual insurance policy that commence as of April 1, 2013

    March 31, 2013
    Purchase Office
    Equipment for $25,000. by issuing a
    three year 12% Note. First interest payment is due January 1 and
    semi-annually thereafter with the entire principal due at maturity

    June 30, 2013
    Purchased land valued
    at 75,000 together with the building for a total of $ 225,000 paid for with $
    25,000 a cash down payment of and by obtaining a mortgage, bearing interest
    at 7 % per annum for the balance. Interest is payable semi annualy except for
    the first payment which is due on January 1. The the entire principal due at
    maturity.

    September 1, 2013
    Opened an account with
    Dewey, Cheatem and Howe to purchase goods for resale On September 1 purchased
    $ 300,000. of Breaking Bad Blue for resale Terms 1/2 due in Net 90 days and
    the balance due in 135 days which BBC paid within the terms

    September 30, 2013
    On September 30 paid $ 20,000 for rent the next six
    months

    September 30, 2013
    Sold and delivered $
    200,000 of Breaking Bad Blue on Account to ABC Co. with a gross margin/gross
    profit of 50%

    October 1, 2013
    Hire 2 employees for
    an annual salary of 24,000; per year, per employee. The employees are paid
    monthly on the first day of the following month in which the services were
    rendered.

    October 15, 2013
    Purchased office
    supplies of $ 5,000

    November 15, 2013
    ABC Co. pays the
    balance due on its account

    November 30, 2013
    Sold and delivered $
    100,000 of Breaking Bad Blue on Account to XYZ Co. with a gross margin/gross
    profit of 50%

    December 31, 2013
    BBC received a
    deposit of $ 125,000 for goods to be manufactured and delivered in January
    2014 From DEF Corp

    January 1, 2014
    The Bank paid interest
    on the cash held in accounts of $ 5,000. for the year ended December 31, 2013

    Additional
    Information

    The company uses a prepetual inventory system

    The office
    equipment has an estimated useful life of 5 years with no salvage value.

    The building has an estimated useful life of 20 years and a
    salvage value of $ 50,000

    The ending supplies inventory is $ 2,000

    BBC’s is a calendar year company whose income tax rate is 50%
    and is payable on April 15th 2014

    The company takes a physical inventory and records any
    adjustments necessary at the end of the year

    The company uses 5% of outstanding AR as a general reserve for
    bad debts

    REQUIRED

    Go through the
    accounting cycle for the nine months ending December 31, 2013:

    1
    Record gerneral journal
    entries for all of the transactions in the table.

    2
    Record all necessary
    adjusting entries.

    3
    Prepare a worksheet
    with columns for the unadjusted trial balance, adjusting entries, adjusted
    trial balance, income statement and balance sheet.

    4
    Record the closing
    entries.

    5
    Prepare an income
    statement (including EPS), balance sheet and statement of changes in retained
    earnings.

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