Accounting

ACCOUNTING

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.

REQUIREMENT 1: RECORD JOURNAL ENTRIES

#	Date	Account	Debit	Credit

REQUIREMENT 1: RECORD JOURNAL ENTRIES (Continued)

#	Date	Account	Debit	Credit

REQUIREMENT 2: POST BEGINNING BALANCES AND JOURNAL ENTRIES TO T-ACCOUNTS

REQUIREMENT 2: POST BEGINNING BALANCES AND JOURNAL ENTRIES TO T-ACCOUNTS (Continued)

REQUIREMENT 3: PREPARE INCOME STATEMENT

REQUIREMENT 4: PREPARE BALANCE SHEET