College Accounting: P21-2A Bruin Corporation has been authorized to issue 5,000 shares

College Accounting P21-2A Completing a corporate worksheet, recording adjusting and closing entries, preparing an income statement and balance sheet.
Bruin Corporation has been authorized to issue 5,000 shares of 12 percent noncumulative, nonparticipating preferred stock with a par value of $100 per share and 200,000 shares of common stock with a par value of $10 per share.  As of December 31, 2010, 1,600 shares of preferred stock and 24,000 shares of common stock has been issued.  A condensed trial balance asof December 31, 2010, is provided below.
 
Instructions:
1. Enter the December 31, 2010 trial balance on an eight-column worksheet.  Provide three lines for the Selling Expenses control account and three lines for the General Expenses control account.  Total and rule the Trial Balance columns.
2. Record the following transactions in general journal form, using page number 6.
a. Ending merchandise inventory is $105,000. Close the beginning inventory and set up the ending inventory.
b. Depreciation of buildings is $12,500 ($10,000 is selling expense; $2,500 is general expense?
c. Depreciation of equipment is $25,000 ($17,000 is selling expense; $8,000 is general expense).
d. Accrued expenses are $8,000 ($6,000 is selling expense; $2,000 is general expense).
e. The balance in Allowance for Doubtful Accounts is adequate.
f. The $69,200 balance in Income Tax Expense represents the quarterly tax deposits.  Adjust the Income Tax Expense account using the following procedure.
1. Extend the Adjusted Income and expense items to the income statement columns and compute the net income before taxes.
Bruin Corporation
Trial Balance (Condensed)
December 31, 2010
Account Name  Debit   Credit 
Cash  46,570 
Accounts Receivable  149,800 
Allowance for Doubtful Accounts  2,000 
Income Tax Refund Receivable
Inventory  100,000 
Land  100,000 
Buildings  300,000 
Accumulated Depreciation - Buildings  37,500 
Equipment  250,000 
Accumulated Depreciation - Equipment  25,000 
Accounts Payable  105,220 
Dividends Payable - Preferred  19,200 
Dividends Payable - Common  21,600 
Accrued Expenses Payable
Income Tax Payable
Preferred Stock, 12%  160,000 
Paid-in Capital in Excess of Par Value - Preferred 16,000 
Common Stock  240,000 
Retained Earnings  128,000 
Sales (net)  1,100,550 
Purchases  600,000 
Selling Expenses Control  162,800 
General Expenses Control  76,700 
Amortization of Organization Costs
Income Tax Expense  69,200 
Income Summary
Totals  $1,855,070   $1,855,070 
 
2. Assuming that taxable income is the same as net income before income taxes, use the tax rate given in this chapter to compute the federal income tax. Round the compound tax to the nearest whole dollar. Ignore state and local income taxes. (federal income tax rates from the chapter – Taxable Income First $50,000, 15%/ Next $25,000, 25%/ Next $25,000, 34%/ Next 235,000, 39%)
3. Complete the worksheet as shown
4. Prepare a condensed income statement for the year
5. Prepare a balance sheet as of December 31, 2013. The balance of retained earnings on January 1, 2013 was 168,800. All dividends fort he year were declared on December 5, 2013, and are payable January 4, 2014.
6. Journalize the adjusting and closing entries on December 31. 
ANALYZE: Assume the dividends were declared in equal amounts over the four quarters of 2013. What percentage of Bruin Corporation’s annual income before tax was spent on dividends to stockholder’s.
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