prepare adjusting entries and footnotes for 20×5

prepare adjusting entries and footnotes for 20×5

Hydromaint Inc. was created in 20×1. Your firm has been working with them since their inception by providing review services each year, as required by their bank. These services have included reviewing the journal entries prepared by the client each year, and making inquiries to the client to understand the methodologies and estimates used. Your firm then proposed adjusting entries to bring the financial statements into compliance with GAAP, and prepared the financial statement footnotes.

When Hydromaint was created they were exclusively providing hydraulic maintenance services. As they have grown they began to carry parts in inventory to expedite their maintenance and repair activities. (Previously they would order parts only when needed.) In 20×4 Hydromaint acquired a 20 percent ownership in PVCO, a supplier of high quality pumps and valves. At that time one of the Hydromaint founders was placed on the board of PVCO.

You have been provided the journal entries for 20×5, and the income statement and balance sheet that was prepared by the client. (Some of the entries are aggregated for simplicity.) Review the financial information provided and prepare a list of questions for the client. These questions should address clarification of methods and estimates to allow you to prepare any adjusting entries and footnotes for 20×5. Your questions will be due by 11pm on Monday, June 8th. .

 

General Journal Entries for Year 5

1) 2/1/x5 Interest Payable $25,186.00
Long Term Debt-Notes $62,198.00
Cash $87,384.00
Record payment of principle and interest on long term notes payable

2) 3/1/x5 Cash $1,575,000.00
Capital Stock-Preferred $700,000.00
Additional Paid in Capital-Preferred $875,000.00
Record issuance of 7,000 shares of preferred stock

3) 4/1/x5 Land $105,000.00
Buildings $215,000.00
Equipment $60,000.00
Cash $380,000.00
Record purchase of land and building for warehouse

4) 5/1/x5 Equity Securities $1,750,000.00
Cash $1,750,000.00
Record purchase of equity interest in LS-Pump/Valve

5) 6/1/x5 Interest Payable $33,835.00
Capital Lease Liability $7,165.00
Cash $41,000.00
Record accrual and payment of rent

6) Cash $492,000.00
A/R $2,358,000.00
Service Revenue $2,850,000.00
Record revenue from maintenance contracts for the year

7) Cash $2,320,000.00
A/R $2,320,000.00
Record payment on A/R

8) A/R $1,360,000.00
Sales Revenue $1,360,000.00
Record revenue from merchandise sales for the year

9) Cash $1,310,000.00
A/R $1,310,000.00
Record payment on A/R

10) Cost of Goods Sold $850,000.00
Merchandise Inventory $850,000.00
Record cost of goods for the year

11) Merchandise Inventory $899,700.00
A/P-Suppliers $899,700.00
Record purchase of merchandise for the year

12) Cost of Goods-Air Freight $80,400.00
Cash $80,400.00
Record payment of air freight for merchandise purchases

13) Cost of Goods-Warehouse Rent $12,000.00
Cash $12,000.00
Record payment of warehouse rent used to store purchased merchandise

14) S&A-Sales Salaries and Commissions $142,400.00
Cash $142,400.00
Record accrual and payment of sales salaries and commissions

15) S&A- Warehouse Wages $55,000.00
Cash $55,000.00
Record accrual and payment of warehouse wages

16) SC-Dir-Crew Wages $1,148,550.00
Cash $1,148,550.00
Record accrual and payment of crew wages

17) SC-Dir-Shop Wages $138,975.00
Cash $138,975.00
Record accrual and payment of shop wages

18) SC-Dir-Truck Rental $26,000.00
Cash $26,000.00
Record accrual and payment of truck rental

19) SC-Dir-Fuel $47,000.00
Cash $47,000.00
Record accrual and payment of truck fuel

20) SC-Dir_Repairs & Maint $12,500.00
Cash $12,500.00
Record payment of repairs and maintenance

21) SC-Ind-Shop Utilities $40,833.00
S&A-Utilities $8,167.00
Cash $49,000.00
Record accrual and payment of utilities

22) Supplies on Hand $1,000.00
SC-Ind-Supplies Expense $60,000.00
A/P Suppliers $61,000.00
Record the purchase of supplies

23) SC-Dir-Equipment Depreciation Expense $6,000.00
A/D-Shop Equipment $6,000.00
Record depreciation on shop equipment

24) S&A-other $31,000.00
S&A-Officers Salaries $140,000.00
S&A-Other Salaries $116,000.00
S&A-Professional Fees $9,000.00
S&A-Office Supplies $15,000.00
S&A-Equipment Rent Expense $8,000.00
Cash $319,000.00
Record accrual and payment of S&A Expenses

25) Cash $36,000.00
Recognized Gain-Equity Securities $4,000.00
Equity Securities-ST $32,000.00
Record sale of trading securities

26) Equity Securities-ST $36,000.00
Cash $36,000.00
Purchase of trading securities

27) A/P Inventoriable Costs $818,800.00
A/P Suppliers $52,000.00
Cash $870,800.00
Record payment of accounts payable

28) Income Tax Payable $203,060.00
Cash $203,060.00
Record payment of Income tax

29) Allowance for Bad Debt $24,800.00
A/R $24,800.00
Wrote off specific account in A/R

30) Cash $37,000.00
Dividend Income $37,000.00
Record dividend from LS-Pump/Valve

31) Equity Securities-Long Term $368,474.00
Equity Securities Equity Interest $368,474.00
Transferred PVCO from Equity Method investment to Cost Method investment

32) Cash $39,000.00
Investment Income-Equity Securities-LT $39,000.00
Record dividend as income from PVCO

33) 12/23/x5 Retained Earnings-Dividends $92,000.00
Cash $92,000.00
Record payment of cash dividend

34) 12/27/x5 Cash $1,800.00
Dividend Income $1,800.00
Record dividends received from trading securities

35) 12/31/x5 Capital Lease Liability $729.00
LT Debt-Notes $7,464.00
ST Portion of LT debt $8,193.00
Allocate current position of LT notes payable from noncurrent to current liabilities

36) 12/31/x5 Bad Debt Expense $35,000.00
Allowance for Bad Debt $35,000.00
Record bad debt expense

37) 12/31/x5 Amortization Expense – License $6,000.00
Licensing Costs $6,000.00
Record amortization of licensing costs

38) 12/31/x5 Amortization Expense-Lease $19,000.00
Interest Expense Capital Lease $33,410.00
Leased Assets-A/D $19,000.00
Interest Payable $33,410.00
Record accrued interest on capital lease and amortization of capital lease asset

39) 12/31/x5 SC-Dir-Truck Depreciation Expense $48,829.00
A/D-Vehicles $48,829.00
Record depreciation on trucks

40) 12/31/x5 S&A-Warehouse Depreciation Expense $10,750.00
A/D-Buildings $10,750.00
Record depreciation on the warehouse

41) 12/31/x5 Depreciation-Equipment $10,000.00
A/D-Equipment $10,000.00
Record depreciation on forklifts

42) 12/31/x5 Interest Expense $18,344.00
Interest Payable $18,344.00
Record accrued interest on notes payable for 20X5

43) 12/31/x5 S&A-Medical Benefits $115,815.00
Cash $115,815.00
Record payment of medical benefits expense

44) 12/31/x5 S&A-Pension Expense $331,461.00
Accrued Pension Liability $28,539.00
Cash $360,000.00
Recorded accrual of pension expenses and contribution to the plan

45) 12/31/x5 Equity Securities-ST $17,325.00
Market Gain/Loss-ST Securities $17,325.00
Adjust trading securities to market

46) 12/31/x5 Income Tax Expense $217,887.00
Income Tax Payable $217,887.00
Record accrual of income tax expense
$18,130,396.00 $18,130,396.00

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