Chapter 7 Comprehensive Problem The trial balance of Pacilio Security Services

Accounting for Receivables

Chapter 7 Comprehensive Problem

The trial balance of Pacilio Security Services, Inc. as of January 1, Year 7, showed the following balances:

During Year 7, Pacilio Security Services completed the following transactions:

1. Paid the salaries payable from the previous year.
2. Paid $4,800 on March 1, Year 7, for a one-year lease in advance on the company van.
3. Paid $8,400 on May 2, Year 7, for one year's office rent in advance.
4. Purchased $550 worth of supplies on account.
5. Paid cash to purchase 105 alarm systems, each costing $285.
6. Pacilio noticed that its accounts receivable balance was increasing, and there were some issues with collections. It estimated that uncollectible accounts expense was about 3% of total credit sales. The company decided to adopt the allowance method of accounting for uncollectible accounts and would record an adjusting entry to reflect this estimate at the end of the year.
7. Pacilio learned that several of its delinquent accounts had declared bankruptcy or moved with no forwarding address, totaling $1,900 in uncollectible accounts.
8. Sold 110 alarm systems for $63,800, all on account. (The cost of goods sold should be computed using the FIFO method.)
9. Paid the balance of accounts payable.
10. Pacilio began accepting credit cards for some monitoring service sales. The credit card company charges a fee of 4%. Total monitoring services for the year amounted to $68,000. Pacilio accepted credit cards for $24,000 of this total, with the remaining $44,000 being sales on account.
11. On July 1, Year 7, Pacilio replenished the petty cash fund. The fund had $21 in currency, along with receipts for $50 for yard mowing, $22 for office supplies, and $9 for miscellaneous expenses.
12. Collected the amount due from the credit card company.
13. Paid a total of $45,000 in cash for salaries.
14. Collected $116,800 in accounts receivable during the year.
15. Paid $9,500 in advertising expenses during the year.
16. Paid $5,200 in utilities expenses during the year.
17. Paid a dividend of $20,000 to the shareholders.

Adjustments:

18. At year-end, $250 worth of supplies were on hand.
19. Recognized the expired rent for both the van and the office for the year.
20. Recognized the uncollectible accounts expense for the year using the allowance method.
21. Accrued salaries at December 31, Year 7, amounted to $2,100.

Required:

a. Record the transactions in general journal form.
b. Post the transactions to T-accounts.
c. Prepare a trial balance.
d. Prepare the income statement, statement of changes in stockholders' equity, balance sheet, and statement of cash flows.
e. Close the temporary accounts to retained earnings.
f. Post the closing entries to T-accounts and prepare a post-closing trial balance.