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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 $9,000accounts 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 at9%. 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 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 31of 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 31was $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: 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 for 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 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. The unfunded pension liability is a long-term liability.

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 11, Problem 3CPP
Textbook Problem
2294 views

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 $9,000accounts 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 at9%.

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:

Chapter 11, Problem 3CPP, Selected transactions completed by Kornett Company during its first fiscal year ended December 31, , example  1

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

  1. 1. Journalize the selected transactions.
  2. 2. Based on the following data, prepare a bank reconciliation for December of the current year:
    1. a. Balance according to the bank statement at December 31, $283,000.
    2. b. Balance according to the ledger at December 31, $245,410.
    3. c. Checks outstanding at December 31, $68,540.
    4. d. Deposit in transit, not recorded by bank, $29,500.
    5. e. Bank debit memo for service charges, $750.
    6. f. A check for $12,700 in payment of an invoice was incorrectly recorded in the Accounts as $12,000.
  3. 3. Based on the bank reconciliation prepared in (2), journalize the entry or entries to be made by Kornett Company.
  4. 4. Based on the following selected data, journalize the adjusting entries as of December 31of the current year:
    1. 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 31was $2,000 (debit).
    2. b. The physical inventory on December 31 indicated an inventory shrinkage of $3,300.
    3. c. Prepaid insurance expired during the year, $22,820.
    4. d. Office supplies used during the year, $3,920.
    5. e. Depreciation is computed as follows:

Chapter 11, Problem 3CPP, Selected transactions completed by Kornett Company during its first fiscal year ended December 31, , example  2

  1. 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 for eight years.
  2. 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.
  3. h. Vacation pay expense for December, $10,500.
  4. 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.
  5. j. Interest was accrued on the note receivable received on October 17.
  6. 5. 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.

Chapter 11, Problem 3CPP, Selected transactions completed by Kornett Company during its first fiscal year ended December 31, , example  3

The unfunded pension liability is a long-term liability.

Chapter 11, Problem 3CPP, Selected transactions completed by Kornett Company during its first fiscal year ended December 31, , example  4

Chapter 11, Problem 3CPP, Selected transactions completed by Kornett Company during its first fiscal year ended December 31, , example  5

1.

To determine

Record the journal entries.

Explanation of Solution

The following are the journal entries.

20Y5ParticularsDebit ($)Credit ($)
January3Petty Cash4,500 
  Cash 4,500
     
February26Office Supplies1,680 
  Miscellaneous Selling Expense570 
  Miscellaneous Administrative Expense880 
  Cash 3,130
     
April14Inventory31,300 
  Accounts Payable 31,300
     
May13Accounts Payable31,300 
  Cash 31,300
     
 17Cash21,200 
  Cash Short and Over40 
  Sales 21,240
     
June2Notes Receivable180,000 
  Accounts  Receivable 180,000
     
August1Cash182,400 
  Notes Receivable 180,000
  Interest Revenue 2,400
     
 24Cash7,600 
  Allowance for Doubtful Accounts1,400 
  Accounts  Receivable 9,000
     
September15Accounts  Receivable1,400 
     Allowance for Doubtful  Accounts 1,400
  

2.

To determine

Prepare the bank reconciliation statement for December.

3.

To determine

Record the bank service charges using miscellaneous administrative expense account.

4.

To determine

Record the adjusting entries.

5.

To determine

Prepare the balance sheet as at December 31, 20Y5 of Company K.

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Chapter 11 Solutions

Financial Accounting
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