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Comprehensive Accounting Cycle Review 9-1 (Part Level Submission)Pina Colada Corp.’s unadjusted trial balance at December 1, 2017, is presented below. Debit CreditCash$25,900  Accounts Receivable35,100  Notes Receivable8,400  Interest Receivable0  Inventory36,280  Prepaid Insurance3,600  Land21,800  Buildings140,100  Equipment60,500  Patent9,630  Allowance for Doubtful Accounts  $600Accumulated Depreciation—Buildings  46,700Accumulated Depreciation—Equipment  24,200Accounts Payable  28,100Salaries and Wages Payable  0Notes Payable (due April 30, 2018)  12,900Income Taxes Payable  0Interest Payable  0Notes Payable (due in 2023)  36,000Common Stock  56,400Retained Earnings  24,410Dividends13,500  Sales Revenue  923,500Interest Revenue  0Gain on Disposal of Plant Assets  0Bad Debt Expense0  Cost of Goods Sold631,500  Depreciation Expense0  Income Tax Expense0  Insurance Expense0  Interest Expense0  Other Operating Expenses61,000  Amortization Expense0  Salaries and Wages Expense105,500  Total$1,152,810 $1,152,810The following transactions occurred during December.Dec. 2 Purchased equipment for $16,200, plus sales taxes of $1,800 (paid in cash).2 Pina sold for $3,550 equipment which originally cost $4,800. Accumulated depreciation on this equipment at January 1, 2017, was $1,850; 2017 depreciation prior to the sale of equipment was $480.15 Pina sold for $5,450 on account inventory that cost $3,280.23 Salaries and wages of $6,370 were paid.Adjustment data:1. Pina estimates that uncollectible accounts receivable at year-end are $4,190.2. The note receivable is a one-year, 8% note dated April 1, 2017. No interest has been recorded.3. The balance in prepaid insurance represents payment of a $3,600, 6-month premium on September 1, 2017.4. The building is being depreciated using the straight-line method over 30 years. The salvage value is $30,600.5. The equipment owned prior to this year is being depreciated using the straight-line method over 5 years. The salvage value is 10% of cost.6. The equipment purchased on December 2, 2017, is being depreciated using the straight-line method over 5 years, with a salvage value of $2,340.7. The patent was acquired on January 1, 2017, and has a useful life of 9 years from that date.8. Unpaid salaries at December 31, 2017, total $2,070.9. Both the short-term and long-term notes payable are dated January 1, 2017, and carry a 10% interest rate. All interest is payable in the next 12 months.10 Income tax expense was $12,000. It was unpaid at December 31.      (a)Prepare journal entries for the transactions listed above and adjusting entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)

Question

Comprehensive Accounting Cycle Review 9-1 (Part Level Submission)

Pina Colada Corp.’s unadjusted trial balance at December 1, 2017, is presented below.

 
Debit
 
Credit
Cash $25,900    
Accounts Receivable 35,100    
Notes Receivable 8,400    
Interest Receivable 0    
Inventory 36,280    
Prepaid Insurance 3,600    
Land 21,800    
Buildings 140,100    
Equipment 60,500    
Patent 9,630    
Allowance for Doubtful Accounts     $600
Accumulated Depreciation—Buildings     46,700
Accumulated Depreciation—Equipment     24,200
Accounts Payable     28,100
Salaries and Wages Payable     0
Notes Payable (due April 30, 2018)     12,900
Income Taxes Payable     0
Interest Payable     0
Notes Payable (due in 2023)     36,000
Common Stock     56,400
Retained Earnings     24,410
Dividends 13,500    
Sales Revenue     923,500
Interest Revenue     0
Gain on Disposal of Plant Assets     0
Bad Debt Expense 0    
Cost of Goods Sold 631,500    
Depreciation Expense 0    
Income Tax Expense 0    
Insurance Expense 0    
Interest Expense 0    
Other Operating Expenses 61,000    
Amortization Expense 0    
Salaries and Wages Expense 105,500    
Total $1,152,810   $1,152,810

The following transactions occurred during December.

Dec. 2   Purchased equipment for $16,200, plus sales taxes of $1,800 (paid in cash).
2   Pina sold for $3,550 equipment which originally cost $4,800. Accumulated depreciation on this equipment at January 1, 2017, was $1,850; 2017 depreciation prior to the sale of equipment was $480.
15   Pina sold for $5,450 on account inventory that cost $3,280.
23   Salaries and wages of $6,370 were paid.

Adjustment data:

1.   Pina estimates that uncollectible accounts receivable at year-end are $4,190.
2.   The note receivable is a one-year, 8% note dated April 1, 2017. No interest has been recorded.
3.   The balance in prepaid insurance represents payment of a $3,600, 6-month premium on September 1, 2017.
4.   The building is being depreciated using the straight-line method over 30 years. The salvage value is $30,600.
5.   The equipment owned prior to this year is being depreciated using the straight-line method over 5 years. The salvage value is 10% of cost.
6.   The equipment purchased on December 2, 2017, is being depreciated using the straight-line method over 5 years, with a salvage value of $2,340.
7.   The patent was acquired on January 1, 2017, and has a useful life of 9 years from that date.
8.   Unpaid salaries at December 31, 2017, total $2,070.
9.   Both the short-term and long-term notes payable are dated January 1, 2017, and carry a 10% interest rate. All interest is payable in the next 12 months.
10   Income tax expense was $12,000. It was unpaid at December 31.
 
 
 
 
 
 

(a)

Prepare journal entries for the transactions listed above and adjusting entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)
check_circleAnswer
Step 1

Explanation for the entry adjustment

Dec 2- The Equipment cost including sales tax needs to be capitalised, so cost becomes $18,000

Dec 2- Sale price of the Equipment= $3550

Purchase price= $4,800

Accumulated depreciation + depreciation  till the date of sale= $1850 +480= $2330

Book value on the date of sale= $4800-$2330= $2,470

Profit on sale of Equipment= $(3550-2470)=$1,080

Dec 15- Accounts Receivables need to be debited and sales need to credited for sales revenue. Cost of goods sold need to be debited and inventory to be credited for the cost of goods sold

 

Adjusting journal entries

1.  Estimated uncollectible accounts receivable= $4190

Esting allowance for doubtful debts= $600

Bad debt expenses= $4190-600= $3590

2. Interest income on notes= 8400*8%*8/12= $448

3. Insurance expenses for each month= $3600/6=$600

Expenses for 4 months need to be charged= $600*4=$2400

4. Depreciation on building= (140,100-30,600)/30=$3650

5. Depreciation on Equipment computation

Original cost =(60500-4800)=$55700

salvage value @10%= $5570

Depreciation per year= (55700-5570)/5=10026

6. Depreciation on new Equipment

Cost= $18,000

Salvage value= $2340

Depreciation= (18000-2340)/5*1/12= $261

9. Interest on notes= (12900+36000)* 10%=$4890

 

Step 2

 

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