TRIAL BALANCE

The trial balance of Pacilio Security Services, Inc. as of January 1, Year 11, had the following normal balances:

Cash $ 113,718
Petty cash 100
Accounts receivable 39,390
Allowance for doubtful accounts 4,662
Supplies 210
Merchandise inventory (48 @ $300) 14,400
Equipment 9,000
Van 27,000
Building 125,000
Accumulated depreciation 28,075
Land 25,000
Sales tax payable 390
Employee income tax payable 1,000
FICA—Social Security tax payable 840
FICA—Medicare tax payable 210
Warranty payable 918
Unemployment tax payable 945
Notes payable—Building 92,762
Bonds payable 50,000
Discount on bonds payable 800
Common stock 50,000
Retained earnings 124,816

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During Year 11, Pacilio Security Services experienced the following transactions:

Paid the sales tax payable from Year 10.
Paid the balance of the payroll liabilities due for Year 10 (federal income tax, FICA taxes, and unemployment taxes).
Issued 5,000 additional shares of the $5 par value common stock for $8 per share.
Issued 1,000 shares of $50 stated value, 5 percent cumulative preferred stock for $52 per share.
Purchased $500 of supplies on account.
Purchased 190 alarm systems at a cost of $310. Cash was paid for the purchase.
After numerous attempts to collect from customers, wrote off $3,670 of uncollectible accounts receivable.
Sold 210 alarm systems for $600 each plus sales tax of 5 percent. All sales were on account.
Record the cost of goods sold related to the sale from Event 8 using the FIFO method.
Billed $125,000 of monitoring services for the year. Credit card sales amounted to $58,000, and the credit card company charged a 4 percent fee. The remaining $67,000 were sales on account. Sales tax is not charged on this service.
Replenished the petty cash fund on June 30. The fund had $10 cash and receipts of $75 for yard mowing and $15 for office supplies expense.
Collected the amount due from the credit card company.
Paid the sales tax collected on $105,000 of the alarm sales.
Collected $198,000 of accounts receivable during the year.
Paid installers and other employees a total of $96,000 for salaries for the year. Assume the Social Security tax rate is 6 percent and the Medicare tax rate is 1.5 percent. Federal income taxes withheld amounted to $10,600. No employee exceeded $110,000 in total wages. The net salaries were paid in cash.
On October 1, declared a dividend on the preferred stock and a $1 per share dividend on the common stock to be paid to shareholders of record on October 15, payable on November 1, Year 11.
Paid $1,625 in warranty repairs during the year.
On November 1, Year 11, paid the dividends that had been previously declared.
Paid $18,500 of advertising expense during the year.
Paid $6,100 of utilities expense for the year.
Paid $9,200 of the Employee Income Tax Payable, $5,280 of the FICA Tax – Soc. Sec. Tax Payable and $1,320 of the FICA Tax – Medicare Tax Payable. Also, paid the Payroll Tax Expense for the 7.5% employer matching of FICA taxes on $88,000 of salaries.
Paid the accounts payable.
Paid bond interest and amortized the discount. The bond was issued in Year 10 and pays interest at 6 percent.
Paid the annual installment of $14,238 on the amortized note. The interest rate for the note is 7 percent.

Adjustment

There was $190 of supplies on hand at the end of the year.
Recognized the uncollectible accounts expense for the year using the allowance method. Pacilio now estimates that 1 percent of sales on account will not be collected.
Recognized depreciation expense on the equipment, van, and building. The equipment, purchased in Year 8, has a five-year life and a $2,000 salvage value. The van has a four-year life and a $6,000 salvage value. The building has a 40-year life and a $10,000 salvage value. The company uses straight-line for the equipment and the building. The van is fully depreciated.
The alarm systems sold in transaction 7 were covered with a one-year warranty. Pacilio estimated that the warranty cost would be 2 percent of alarm sales.
The unemployment tax on the three employees has not been paid. Record the accrued unemployment tax on the salaries for the year. The unemployment tax rate is 4.5 percent and gross wages for all three employees exceeded $7,000.
Recognized the employer Social Security and Medicare payroll tax that has not been paid on $8,000 of salaries expense.

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