Grass Roots Inc. at the end of 2009.;Grass Roots Inc.;Balance Sheet;December 31, 2009;Cash $ 600,000;Accounts receivable (Net of allowance account,$10,000) 600,000;Prepaid Insurance 60,000;Inventory 800,000;Equipment (Net of Accum. Depreciation, $200,000) 1,000,000;Total Assets $3,060,000;Long Term Note 400,000;Accounts payable 780,000;Unearned Service Revenue 120,000;Common stock 1,000,000;Retained earnings 760,000;Total Liabilities and Stockholders? Equity $3,060,000;Three kinds of events took place in 2010: Operations, Capital Purchases and Capital Dispositions.;Operations;A. The following summarize operations for 2010. Prepare journal entries for each numerical item.;1.Sales totaled $8,000,000. All sales are on credit with discounts offered for quick payment. The company records sales using the gross method.;2.Cash collected from customers totaled $6,800,000. The customers took discounts in the amount of $70,000.;3.Inventory purchased on account during the year totaled $5,500,000;4.Payments to vendors for credit purchases totaled $2,300,000. Grass Roots did not pay within discount terms.;5.Bad debts were written off in 2010 totaling $30,000.;6.Additional operating expenses in 2010 were as follows: Salaries-$800,000, Advertising- $250,000, Rent-$800,000, Income Taxes $200,000;B. The following represent adjusting entries that need to be made in 2010.;1. The company uses LIFO for its only inventory item. The reported inventory of $800,000 at December 31, 2009, consisted of two layers: 2,000 units costing $200 each and 1,600 units costing $250 each. The $5,500,000 purchases of inventory in 2010 consisted of these two purchases, in order of occurrence: 10,000 units costing $260 each and 10,000 units costing $290 each. At the end of 2010, 6,000 units remained as ending inventory. Prepare the adjusting entry for Cost of goods sold.;2. Accrued interest on the Long Term note from the 2009 Balance sheet is $21,000.;3. Insurance has expired in the amount of $30,000.;4. Grass Roots also services equipment on a yearly contract basis. $40,000 of the Unearned Service Revenue account has been earned.;5. Based on an analysis of Accounts receivable, it is estimated that 1% of the 2010 Accounts receivable balance will result in bad debts for 2011.
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