Chapter Review
11-7iComprehensive Problem 3
Selected transactions completed by Kornett Company during its first fiscal year ended December 31, 20Y8, were as follows:
Jan. |
3. |
Issued a check to establish a petty cash fund of $4,500. |
Feb. |
26. |
Replenished the petty cash fund, based on the following summary of petty cash receipts: office supplies, $1,680; miscellaneous selling expense, $570; miscellaneous administrative expense, $880. |
Apr. |
14. |
Purchased $31,300 of merchandise on account, terms, n/30. The perpetual inventory system is used to account for inventory. |
May |
13. |
Paid the invoice of April 14. |
17. |
Received cash from daily cash sales for $21,200. The amount indicated by the cash register was $21,240. |
|
June |
2. |
Received a 60-day, 8% note for $180,000 on the Ryanair account. |
Aug. |
1. |
Received amount owed on June 2 note plus interest at the maturity date. |
24. |
Received $7,600 on the Finley account and wrote off the remainder owed on a $9,000 accounts receivable balance. (The allowance method is used in accounting for uncollectible receivables.) |
|
Sept. |
15. |
Reinstated the Finley account written off on August 24 and received $1,400 cash in full payment. |
15. |
Purchased land by issuing a $670,000, 90-day note to Zahorik Co., which discounted it at 9%. |
|
Oct. |
17. |
Sold office equipment in exchange for $135,000 cash plus receipt of a $100,000, 90-day, 9% note. The equipment had a cost of $320,000 and accumulated depreciation of $64,000 as of October 17. |
Nov. |
30. |
Journalized the monthly payroll for November, based on the following data: |
30. |
Journalized the employer’s payroll taxes on the payroll. |
|
Dec. |
14. |
Journalized the payment of the September 15 note at maturity. |
31. |
The pension cost for the year was $190,400, of which $139,700 was paid to the pension plan trustee. |
Instructions
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Journalize the selected transactions.
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Based on the following data, prepare a bank reconciliation for December of the current year:
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Balance according to the bank statement at December 31, $283,000.
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Balance according to the ledger at December 31, $245,410.
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Checks outstanding at December 31, $68,540.
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Deposit in transit, not recorded by bank, $29,500.
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Bank debit memo for service charges, $750.
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A check for $12,700 in payment of an invoice was incorrectly recorded in the accounts as $12,000.
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Based on the bank reconciliation prepared in (2), journalize the entry or entries to be made by Kornett Company.
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Based on the following selected data, journalize the adjusting entries as of December 31 of the current year:
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Estimated uncollectible accounts at December 31, $16,000, based on an aging of accounts receivable. The balance of Allowance for Doubtful Accounts at December 31 was $2,000 (debit).
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The physical inventory on December 31 indicated an inventory shrinkage of $3,300.
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Prepaid insurance expired during the year, $22,820.
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Office supplies used during the year, $3,920.
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Depreciation is computed as follows:
Asset
Cost
Residual Value
Acquisition Date
Useful Life in Years
Depreciation Method Used
Buildings
$900,000
$ 0
January 2
50
Double-declining-balance
Office Equip.
246,000
26,000
January 3
5
Straight-line
Store Equip.
112,000
12,000
July 1
10
Straight-line
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A patent costing $48,000 when acquired on January 2 has a remaining legal life of 10 years and is expected to have value for eight years.
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The cost of mineral rights was $546,000. Of the estimated deposit of 910,000 tons of ore, 50,000 tons were mined and sold during the year.
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Vacation pay expense for December, $10,500.
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A product warranty was granted beginning December 1 and covering a one-year period. The estimated cost is 4% of sales, which totaled $1,900,000 in December.
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Interest was accrued on the note receivable received on October 17.
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Based on the following information and the post-closing trial balance that follows, prepare a balance sheet in report form at December 31 of the current year:
The merchandise inventory is stated at cost by the LIFO method.
The product warranty payable is a current liability.
Vacation pay payable:
Current liability
$7,140
Long-term liability
3,360
The unfunded pension liability is a long-term liability.
Notes payable:
Current liability
$ 70,000
Long-term liability
630,000
AnswerCheck Figure: 5. Total assets, $3,569,290