Selected transactions completed by Kornett Company during its first fiscal year ended December 31, 2016, were as follows:

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Selected transactions completed by Kornett Company during its first fiscal year ended December 31, 2016, 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 1/10, n/30. The perpetual inventory system is used to account for inventory.
May 13 Paid the invoice of April 14 after the discount period had passed.
17 Received cash from daily cash sales for $21,200. The amount indicated by the cash register was $21,240.
Jun. 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. Assume a 360-day year.
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.)
Sep. 15 Reinstated the Finley account written off on August 24 and received $1,400 cash in full payment. (Record as two entries.)

Record the following on journal page 22.

Sep. 15 Purchased land by issuing a $670,000, 90-day note to Zahorik Co., which discounted it at 9%. Assume a 360-day year.
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:

 

Salaries:
Sales salaries $135,000
Office salaries 77,250
$212,250
Deductions:
Income tax withheld $39,266
Social security tax withheld 12,735
Medicare tax withheld 3,184
Unemployment Tax rates:
State unemployment 5.4%
Federal unemployment 0.8%
Amount subject to unemployment taxes:
State unemployment $5,000
Federal unemployment 5,000

 

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.

 

Required:
1. Journalize the selected transactions, starting on page 21 of the journal.*
2. Based on the following data, prepare a bank reconciliation for December 2016. Refer to the Labels and Amount Descriptions list for exact wording of text entries. Enter all amounts as positive numbers.

Balance according to the bank statement at December 31, $283,000.
Balance according to the ledger at December 31, $245,410.
Checks outstanding at December 31, $68,540.
Deposit in transit, not recorded by bank, $29,500.
Bank debit memo for service charges, $750.
A check for $12,700 in payment of an invoice was incorrectly recorded in the accounts as $12,000.
3. Based on the bank reconciliation prepared in (2), journalize the entry or entries to be made by Kornett Company on page 23 of the journal. Kornett Company uses the Miscellaneous Administrative Expense account for bank service charges.
4. Based on the following selected data, journalize the adjusting entries as of December 31, 2016 on page 23 of the journal:

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).
The physical inventory on December 31 indicated an inventory shrinkage of $3,300.
Prepaid insurance expired during the year, $22,820.
Office supplies used during the year, $3,920.
Depreciation is computed as follows:

 

    Residual Acquisition Useful Life  
Asset Cost Value Date in Years Depreciation Method Used
Buildings $900,00 $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

 

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.
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.
Vacation pay expense for December, $10,500.
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.
Interest was accrued on the note receivable received on October 17. Assume a 360-day year.
* Refer to the Chart of Accounts for exact wording of account titles.

 

Based on the following information and the post-closing trial balance that follows, prepare a balance sheet in report form at December 31, 2016. Be sure to complete the heading of the balance sheet. Enter assets in the order in which they appear in the post-closing trial balance. Refer to information given in the problem and the Labels and Amount Descriptions list for exact wording of text entries. There is no need to include “(current portion)” or a due date with any account titles. The word “Less” and colons will appear automatically. Enter all amounts as positive numbers

The merchandise inventory is stated at cost by the LIFO method.
The product warranty payable is a current liability.
Vacation pay payable:

 

The merchandise inventory is stated at cost by the LIFO method.
The product warranty payable is a current liability.
Vacation pay payable:

 

The unfunded pension liability is a long-term liability.

Notes payable:

Current liability: $70,000
Long-term liability: 630,000

 

POST-CLOSING TRIAL BALANCEKornett Company

December 31, 2016

  ACCOUNT TITLE DEBIT CREDIT
1 Petty Cash 4,500.00
2 Cash 243,960.00
3 Notes Receivable 100,000.00
4 Accounts Receivable 470,000.00
5 Allowance for Doubtful Accounts 16,000.00
6 Merchandise Inventory 320,000.00
7 Interest Receivable 1,875.00
8 Prepaid Insurance 45,640.00
9 Office Supplies 13,400.00
10 Land 654,925.00
11 Buildings 900,000.00
12 Accumulated Depreciation-Buildings 36,000.00
13 Office Equipment 246,000.00
14 Accumulated Depreciation-Office Equipment 44,000.00
15 Store Equipment 112,000.00
16 Accumulated Depreciation-Store Equipment 5,000.00
17 Mineral Rights 546,000.00
18 Accumulated Depletion 30,000.00
19 Patents 42,000.00
20 Social Security Tax Payable 25,470.00
21 Medicare Tax Payable 4,710.00
22 Employees Federal Income Tax Payable 40,000.00
23 State Unemployment Tax Payable 270.00
24 Federal Unemployment Tax Payable 40.00
25 Salaries Payable 157,000.00
26 Accounts Payable 131,600.00
27 Interest Payable 28,000.00
28 Product Warranty Payable 76,000.00
29 Vacation Pay Payable 10,500.00
30 Unfunded Pension Liability 50,700.00
31 Notes Payable 700,000.00
32 J. Kornett, Capital 2,345,010.00
33 Totals 3,700,300.00 3,700,300.00

 

 

0
Part 1
1 Gampfer Company
3-Jan Petty Cash 4500  
  Cash   4500
       
26-Feb Office Supplies 1680  
  Misc Selling Expense 570  
  Misc Admin Expense 880  
  Cash   3130
       
14-Apr Merchandise Inventory 31300  
  Account Payable   31300
       
13-May Account payable 31300  
  Cash   31300
       
17-May Cash 21200  
  Cash Excess/Short 40  
  Cash Sales   21240
       
2-Jun Notes Receivable 180000  
  Account Receivable   180000
       
1-Aug Cash 194400  
  Notes Receivable   180000
  Interest Income   14400
       
24-Aug Cash 7600  
  Allowance for doubtful accounts 1400  
  Account Receivable   9000
       
15-Sep Account Receivable 1400  
  Allowance for doubtful accounts   1400
       
15-Sep Cash 1400  
  Account Receivable   1400
       
15-Sep Land 654925  
  Discount on notes payable 15075  
  Notes Payable   670000
       
17-Oct Cash 135000  
  Notes Receivable 100000  
  Accumulated Depreciation 64000  
  Loss on sale of fixed assets 21000  
  Office Equipment   320000
       
30-Nov Sales Salaries expense 135000  
  Office Salaries expense 77250  
  Social Security Taxes payable   12735
  Medicare Taxes Payable   3184
  Federal Income Taxes Payable   39266
  Salaries payable   157065
       
30-Nov Pay roll tax expense 11628  
  Social security taxes payable   12735
  Medicare taxes payable   3184
  State unemployement Taxes payable   270
  Federal unemployement taxes payable   4
       
14-Dec Notes Payable 670000  
  Cash   670000
       
31-Dec Pension expenses 190400  
  Cash   139700
  Unfunded pension liability   50700

 

2

Bank Reconciliation Statement
Balance as per Bank Statement 283000
add Deposit in transit 29500
less Outstanding Checks 68540
Adjuted Balance per books 243960
   
Balance as per book (depositors record) 245410
less Service charges by bank 750
less correction of error 700
Adjusted Balance per books 243960

 

3

Date Title of account Debit Credit
31-Dec Service Charges 750  
  Account payable 700  
  Cash   1450

 

4

Part 4 Adjusting Entries    
a Bad Debts Expense 18000  
  Allowance for doubtful accounts   18000
       
b Loss due to Shrinkage 3300  
  Merchandise Inventory   3300
       
c Insurance Expense 22820  
  Prepaid Insurance   22820
       
d Office Supplies Expesne 3920  
  Office Supplies   3920
       
e Depreciation Expense 90000  
  Accumulated Depreciation Building   36000
  Accumulated Depreciation Office Equp   44000
  Accumulated Depreciation Store Equp   10000
       
f Amortization Expense 6000  
  Patents   6000
       
g Depletion Expesne 30000  
  Accumlated Depletion Mineral Rights   30000
       
h Vacation pay expense 10500  
  Vacation pay payable   10500
       
i Warranty Expenes 76000  
  Warranty payable   76000
       
j Interest Receivable 1900  
  Interest Income   1900

5

5      
  Balance Sheet
  Assets    
  Current Assets    
  Petty Cash 4500  
  Cash 243960  
  Total cash   248460
  Notes Receivable   100000
  Accounts Receivable 470000  
  less Allowance for doubtful accounts -16000 454000
  Merchandise Inventory   320000
  Interest Receivable   1875
  Prepaid Insurance   45640
  Office Supplies   13400
  Total Current Assets   1183375
  Property Plant and Equipment    
  Land   654925
  Building 900000  
  less Accumulated Depreciation Building -36000 864000
  Office Equipemnt 246000  
  less Accumulated Depreciation Off. Eqp -44000 202000
  Store Equipemnt 112000  
  less Accumulated Depreciation Store Eqp -5000 107000
  Mineral Rights 546000  
  less Accumlated Depletion -30000 516000
  Total Property Plant and Equipment Net   2343925
  Intangible Assets    
  Patents   42000
  Total Assets   3569300
       
  Liabilities and Owner’s Equity    
  Current Liabilities    
  Social Seucrity Tax Payable   25470
  Medicare Taxes Payable   4710
  Employee Federal Income Tax Payable   40000
  State Unemployment Taxes Payable   270
  Federal Unemployment Taxes Payable   40
  Salaries Payable   157000
  Accounts Payable   131600
  Interest Payable   28000
  Product Waranty Payable   76000
  Vacation Pay Payable   7140
  Notes Payable   70000
  Total Current Liabilities   540230
       
  Long Term Liabilities    
  Vacation Pay Payable   3360
  Unfunded Pension Liability   50700
  Notes Payable   630000
  Long Term Liabilities   684060
  Total Liabilities   1224290
       
  Owners’ Equity   2345010
  Total Liabilities and Owner’s Equity   3569300

 

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