Playoffs Inc. sells inventory and provides services (basketball lessons). The following balance sheet is for Playoffs Inc. for the fiscal year 2019 ending December 31, 2019:
Playoffs Inc.
Balance Sheet
As of December 31, 2019
Cash $200 Accounts Payable $85
Accounts Receivable 100 Interest Payable 15
Inventory 300 Bonds Payable 300
Total Current Assets $600 Total Liabilities $400
PP&E, Gross $600 Common Stock $400
Accumulated Depreciation (200) Retained Earnings 200
PP&E, Net $400 Total Stockholders’ Equity $600
Total Assets $1,000 Total Liabilities & S/H Equity $1,000
The following transactions occurred in 2020:
1. On 1/1/20, Playoffs Inc. issued stock for $250.
2. On 1/1/20, Playoffs Inc. paid $10 to cover office rent for the period 1/1/20-12/31/20.
3. On 2/15/20, Playoffs Inc. purchased $600 of inventory (60% of the purchase was paid in cash).
4. On 7/1/20, Playoffs Inc. sold inventory for $500 (the cost of the inventory sold is $250); all the sales were on credit.
5. On 8/1/20, the Bucks signed up for lessons from Playoffs Inc.; the monthly fee for lessons is $400. Playoffs Inc. received $2,400 in cash (in advance from the Bucks) for these lessons.
6. On 8/1/20, Playoffs Inc. paid $36 of interest on the bonds and bought back $100 of the bonds (Bonds Payable listed in the Balance Sheet) with no resulting gain or loss on this repurchase.
7. On 12/31/20, the following transactions should be recorded before preparing the annual financial statements:
A. Annual interest rate on the bonds is 12% (make sure the annual interest expense matches the bonds outstanding during the year, otherwise make an adjustment).
B. The manager of Playoffs Inc. did not receive his annual salary of $80.
C. $100 of depreciation on PP&E needs to be recorded.
D. Playoffs Inc. provided lessons to the Lakers during November 2020. A bill for $500 was sent but the payment has not been received yet.
E. Playoffs Inc. declared $50 cash dividends on 12/31/20 to be paid in cash on 1/10/21.
F. Playoffs Inc. used the office space during the year (related to transaction 2.).
G. Playoffs Inc. provided 5 months of services (lessons) to the Bucks before the year-end (related to transaction 5.).
REQUIRED:
1. Record Playoffs Inc.’s journal entries (for transactions 1 through 7G.)
2. Post Playoffs Inc.’s beginning balances and journal entries for 2020 to T-accounts
3. Prepare Playoffs Inc.’s Income Statement for the year ended December 31, 2020
4. Prepare Playoffs Inc.’s Balance Sheet as of December 31, 2020.
