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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Selected transactions completed by Kornett Company during its first fiscal year ended December 31, 20Y8, were as follows:

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Instructions

1 Journalize the selected transactions.

2 Based on the following data, prepare a bank reconciliation for December of the current year:

a Balance according to the bank statement at December 31. $283,000.

b Balance according to the ledger at December 31, $245,410.

c Checks outstanding at December 31, $68,540.

d Deposit in transit, not recorded by bank, $29,500.

e Bank debit memo for service charges, $750.

f 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.

4 Based on the following selected data, journalize the adjusting entries as of December 31 of the current year.

a. 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).

b. The physical inventory on December 31 indicated an inventory shrinkage of $3:300.

c. Prepaid insurance expired during the year, $22,820.

d. Office supplies used during the year, $3,920.

e. Depreciation is computed as follows:

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f. A patent costing $48,000 when acquired on January 2 has a remaining legal life of 10 years and is expected to have value Tor eight years.

g. 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.

h. Vacation pay expense for December, $10,500.

i. 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.

j. Interest was accrued on the note receivable received on October 17.

5. Based on the following information and the pose-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:

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The unfunded pension liability is a long-term liability.

Notes payable:

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1.

To determine

Comprehensive Problem

To Record: The journal entries.

Explanation

The following are the journal entries.

20Y5 Particulars Debit ($) Credit ($)
January 3 Petty Cash 4,500
Cash 4,500
February 26 Office Supplies 1,680
Miscellaneous Selling Expense 570
Miscellaneous Administrative Expense 880
Cash 3,130
April 14 Inventory 31,300
Accounts Payable 31,300
May 13 Accounts Payable 31,300
Cash 31,300
17 Cash 21,200
Cash Short and Over 40
Sales 21,240
June 2 Notes Receivable 180,000
Accounts  Receivable 180,000
August 1 Cash 182,400
Notes Receivable 180,000
Interest Revenue 2,400
24 Cash 7,600
Allowance for Doubtful Accounts 1,400
Accounts  Receivable 9,000
September 15 Accounts  Receivable 1,400
   Allowance for Doubtful  Accounts 1,40...

2.

To determine

To Prepare: The bank reconciliation statement for December.

3.

To determine

To Record: The bank service charges using miscellaneous administrative expense account.

4.

To determine

To Record: The adjusting entries.

5.

To determine

To Prepare: The balance sheet as at December 31, 20Y5 of Company K.

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