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Yash answered on Nov 28 2021
Instruction
Narrative and Instructions
Rockford Corporation is a wholesale plumbing supply distributor. The corporation was organized
in 1981, under the laws of the State of Illinois, with an authorized capitalization of 100,000 shares
of no-par common stock with a stated value of $15 per share. The common stock is sold over the
the counter in the local area. You have been hired as of Thursday, December 25, 2018, to replace the
controller, who has resigned. As controller, you are responsible for the corporation's accounting
recrods, preparation of the financial statements, safeguarding the corporate assets, and providing
management with financial information to set prices and to monitor and control operations.
Rockford Corporation closes its books annually on December 31 but prepares financial statements
quarterly. Adjusting entries are posted to the general ledger only at year-end; at the end of the
first, second, and third quarter the adjustments are entered only on a work sheet, not in the general
ledger. Therefore, the adjusting entries to be recorded on December 31 are annual adjustments that
you must journalize and the post to the general ledger accounts before preparing the financial
statements.
Rockford Corporation maintains a perpetual inventory system and takes a physical count each year
to adjust the inventory carrying amount. Purchases are recorded at the gross amount (discounts
taken are recognized at the date of payment) of the supplier's invoice, and the terms vary with
each supplier. Sales on account are subject to terms of 2/10, n/30. Discounts are taken and granted
only when the terms are met. The cost of all inventory sold in December was 70% of the sales price.
The corporation uses the following journals and ledgers:
Journals
1. A sales journal (S) - to record sales of merchandise on account.
2. A purchase journal (P)- to record purchases of merchandise on account.
3. A cash receipts journal (CR) - to record all cash receipts.
4. A cash disbursements journal (CD) - to record all cash payments.
5. A general journal (J) - to record all transacitons that cannot be recorded in the other journals.
Ledgers
1. A general ledger
In recording sales transactions, each sale should be posted on the day of the sale directly to the
customer's account in the subsidiary ledger, using the invoice number as the posting reference
number in the subsidiary account. Also, cash receipts from customers should be posted to the
subsidiary ledger on the day they are received. The purchase order number should be used as
the posting reference number in the subsidiary ledger for purchases on account from suppliers.
Purchases from suppliers and payments to them should be posted daily. All other individual posting
may be made weekly or at the month-end. Account numbers should be used as posting reference
numbers in the journals. Officers and office personnel are salaried employees and are paid monthly
on the last day of each month. The delivery truck drivers and warehouse employees are hourly wage
employees and are paid biweekly. Each biweekly pay period ends Friday. On the following Monday
you assistants provide you with a payroll summary from which you prepare general journal entries
to record the biweekly payroll and the employer's taxes on the payroll. The biweekly employees'
paychecks are distributed on the following day (Tuesday).
The January 1, 2018, balances appear in the general ledger accounts as well as the Noverber 30, 2018,
balances, for those accounts whose balances have changed. All transacitons affecting the non-
current accounts from January 1, 2018, through Noverber 30, 2018, with explanations, appear in
these accounts to facilitate the preparation of the statement of cash flows.
Subsidiary ledger account balances as of Noverber 30, 2018, are as follows:
Accounts Receivable Acct No Amount
Boecker Builders 117 72,420
The Potts Company 122 42,300
Swanson Brothers Contruction 133 28,750
A & B Hardware 143 - 0
Trudy's Plumbing 155 13,500
Coconino Contractors Inc 160 31,700
Rankin Plumbing Corp 166 76,350
Beverly's Building Products 175 12,800
Bilder Construction Co 180 68,900
Iwanaga Plumbing and Heating 190 4,800
Total 351,520
Accounts Payable Acct No Amount
Phoenix Plastics 14 18,280
Business Basics Inc 16 - 0
Edward's Plumbing Suppliers 18 20,050
DeKalb Transport 20 - 0
Oxenford Copperworks 35 31,700
Smith Pipe Co 39 35,000
Ron & Rod's Plumbing Products 44 14,850
Khatan Steel Corp 57 18,000
Total 137,880
The transactions through December 23 have already been recorded by the former controller. You
are to begin your work by entering the transaction of December 25 for the payment of cash to
repurchase stock.
Dec-18
S M T W T F S
1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30 31
December Transactions
December
1 Received a check in the amount of $28,175 from Swanson Brothers Contruction in full
payment of invoice No. 1120 dated Novermber 26 in the amount of $28,750.
1 Sold sewer and drainage pipe to Beverly's Building Products on account, invoice No. 1201
for $25050.
2 Purchased copper tubing and fittings from Edward's Plumbing Supplies Inc. on account,
purchase order No. 315 for $35880, terms n/60.
2 Issued check No. 1580 for $31700 to Oxenford Copperworks in settlement of the
balance owned on purchase order No. 280.
3 A court notice indicates that Iwanaga Plumbing and Heating is bankrupt and payment
of its account improbable; the president orders the account to be written off as a
bad debt (invoice No. 780).
3 Sold bathroom fixtures to Bilder Construction Co on account, invoice No. 1202 for
$42720.
4 Received a check in the amount of $41454 from the Potts Co in full payment of invoice
No. 1128 dated November 27 for $42300.
4 Sold plumbing supplies and plastic pipe to Coconino Contractors Inc. on account, invoice
No. 1203 for $11200.
4 Issued check No. 1581 for $1120 to Standard Oil Co, in payment of gas, oil, and truck repair
from Tierney's Standard Service.
5 Issued check No. 1582 for $17820 to Khatan Steel Corp. in full settlement of purchase order
No. 312 for $18000.
5 Issued check No. 1583 for $12,054 to Phoenix Plastics in full payment of Phoenix's invoice
dated November 28 in the amount of $12,300, for purchase order No. 313, terms 2/10, n/30.
5 Received a check in the amount of $74823 from Rankin Plumbing Corp. in full payment
of invoice No. 1129 dated November 28 for $76350.
8 Sold cast pipe to Trudy's Plumbing on account, invoice No. 1204 for $23100.
8 Received a check in the amount of $31700 from Coconion Contractors, Inc. in full payment
of invoice No. 1091 dated October 20.
8 Purchased bathroom fixtures from Phoenix Plastics, on account, purchcase order No. 316
for $51900 terms 3/10, n/30.
8 Received a check in the amount of $39100 from Boecker Builders in partial payment of
balance outstanding covering invoice Nos. 1050 and 1071.
9 Issued check No. 1585 for $790 to Scooter Gordon for lettering and sign painting on some
delivery trucks.
9 Issued check No. 1586 for $5980 to Phoenix Plastics, in payment of Phoenix's invoice dated
November 12 in the amount of $5980, our purchase order No. 299.
10 Issued check No. 1587 for $34300 to Smith Pipe Co in full payment of their invoice dated
November 28, terms 2/15, n/30, our purchase order No. 314.
10 Received a check in the amount of $13500 from Trudy's Plumbing in full settlement of
invoice No. 1106 dated November 7.
10 Sold pipe, fixtures, and accessories to Trudy's Plumbing on account, invoice No. 1205 for
$33850.
11 The payroll summary for the biweekly pay period ended Friday, December 5 contained the
follwing information:
Delivery and warehouse wages 5,890
FICA taxes withheld 450
Federal income taxes withheld 1,472
State income taxes withheld 471
Net pay 3,497
Employer's payroll taxes:
FICA tax 450
Federal unemployment tax - 0
State unemployment tax - 0
Issued check No. 1584 for the amount of the net pay and deposited it in the payroll bank
account. Individual payroll checks were then preppared for distributions to the biweekly
emplyees on Tuesday, December 11, 2018.
11 Sold pumbing supplies and copper tubing to The Potts Company on account, invoice No.
1206 for $51450.
11 Received a check in the amount of $33,320 from Boecker Builders in full payment of invoice
No. 1071.
11 Cash sales to date totaled $15258.
12 Received a check in the amount of $22638 from Trudy's Plumbing in payment of inoivce
No. 1204.
12 Sold plumbing fixtures and supplies to Boecker Builders, on account, invoice No. 1207
for $24,730.
15 The Potts Co returned defective copper tubing that is purchased on December 11. A credit
memo in the amount of $5145 is issued relative to invoice No. 1206. The copper tubing
had a cost of $3601.
15 The defective copper tubing is returned to Edward's Plumbing supplies, Inc. along with
a debit memo in the amount of $3601 in reduction of purchase order No. 315.
15 Issud check No. 1588 for $599 in payment of November telephone bill to Northern
Illinois Communications.
16 Issued check No. 1589 in the amount of $12,360 in payment of federal withholding taxes,
$10,573, and FICA taxes, $1787, payable on November salaries and wages; The check is
remitted to the Winnebago County Bank as the depository.
16 Issued check No. 1590 for $50,343 to Phoenix Plastics, Inc, in payment of purchase order
No. 316.
17 The president informs you that Bilder Construction Co agrees to convert the $68900
overdue account receivable (invoice No. 1120) to a 6% note due six months from today.
17 Purchased plumbing materials from Smith Pipe Company on account, purcase order No.
317 for $,55,120 terms 2/15, n/60.
17 Sold drain tile, plastic pipe, and copper tubing to A & B Hardware on account, invoice No.
1208 for $8,340.
18 Sold fixtures and materials to Coconino Contractors, Inc. on account, invoice No. 1209 for
$47,930.
18 An invoice in the amount of $1,021 was received from S. White Trucking Company for
freight on purchase order No. 317 and paid by issuing check No. 1591.
18 Received a check in the amount of $33,173 from Trudy's Plumbing in payment of invoice
No. 1205.
19 Purchased office supplies from the Pen & Pad, issuing check No. 1592 in the amount of
$1,460. (Note: Debit asset account).
19 Purchased a new Faith computer for $7600 from Business Basics, Inc, purchase order
No, 318, paying $600 down through check No. 1593 with the balance due in thirty days
(n/30). The computer has an estmated life of 6 years with a salvage value of $1600.
22 Purchased bathroom and kitchen fixtures from Phoenix Plastics, on account, purchase
order No. 319 for $48,330, terms 1/10, n/30.
22 Received a bill from DeKalb Transport for $3520 for freight costs incurred during the last 30
days, terms n/30.
NOTE: Transactions up to this point have been recorded. At this point you became
controller and are responsible for recordign all further transactions.
25 The board of directors voted to purchase 3,800 shares of its own stock from stockholder 0
Dionne Schivone at $48 per share and issued check No. 1595 in payment. Stock repurchases
are recorded at cost. Rockford is purchasing these shares because Ms. Schivone had been
a valuable employee.
25 The payroll summary for the biweekly pay period ended Friday, December 21 contained the
follwing information:
Delivery and warehouse wages 5,970
FICA taxes withheld 456
Federal income taxes withheld 1,493
State income taxes withheld 477
Net pay 3,545
Employer's payroll taxes:
FICA tax 456
Federal unemployment tax - 0
State unemployment tax - 0
Issued check No. 1594 for the amount of the net pay and deposited it in the payroll bank
account. Individual payroll checks were then prepared for distributions...