
Accounting, Chapters 14-26
27th Edition
ISBN: 9781337272117
Author: WARREN, Carl S.; Reeve, James M.; Duchac, Jonathan
Publisher: South-Western College Pub
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Concept explainers
Question
Chapter 11, Problem 3CPP
1.
To determine
Comprehensive Problem
To Record: The journal entries.
1.
Expert Solution

Explanation of Solution
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 | 1,400 | |||
15 | Cash | 1,400 | ||
Accounts Receivable | 1,400 | |||
September | 15 | Land | 654,925 | |
Interest Expense | 15,075 | |||
Notes Payable | 670,000 | |||
October | 17 | Cash | 135,000 | |
Notes Receivable | 100,000 | |||
| 64,000 | |||
Loss on Sale of Office Equipment | 21,000 | |||
Office Equipment | 320,000 | |||
November | 30 | Sales Salaries Expense | 135,000 | |
Office Salaries Expense | 77,250 | |||
Employees Income Tax Payable | 39,266 | |||
Social Security Tax Payable | 12,735 | |||
Medicare Tax Payable | 3,184 | |||
Salaries Payable | 157,065 | |||
30 | Payroll Tax Expense | 16,219 | ||
Social Security Tax Payable | 12,735 | |||
Medicare Tax Payable | 3,184 | |||
State | 270 | |||
Federal Unemployment Tax Payable | 30 | |||
December | 14 | Notes Payable | 670,000 | |
Cash | 670,000 | |||
31 | Pension Expense | 190,400 | ||
Cash | 139,700 | |||
Unfunded Pension Liability | 50,700 |
Table (1)
2.
To determine
To Prepare: The
2.
Expert Solution

Explanation of Solution
Prepare the bank reconciliation statement for Company K.
K Company | ||
Bank Reconciliation December 31, 20Y5 | ||
Particulars | Amount ($) | Amount ($) |
Balance according to bank statement | 283,000 | |
Adjustments: | ||
Deposit in transit, not recorded by bank | 29,500 | |
Deduct outstanding checks | (68,540) | |
Total adjustments | (39,040) | |
Adjusted balance | 243,960 | |
Balance according to company’s records | 245,410 | |
Adjustments: | ||
Bank service charges | (750) | |
Error in recording check | (700) | |
Total adjustments | (1,450) | |
Adjusted balance | 243,960 |
Table (2)
3.
To determine
To Record: The bank service charges using miscellaneous administrative expense account.
3.
Expert Solution

Answer to Problem 3CPP
Record the
20Y5 | Particulars | Debit ($) | Credit ($) | |
December | 31 | Miscellaneous Expense | 750 | |
Accounts Payable | 700 | |||
Cash | 1,450 |
Table (3)
Explanation of Solution
- Miscellaneous expense is an expense account and it decreases the value of equity by $750. Therefore, debit miscellaneous expense account with $750.
- Accounts payable is a liability and it is decreased by $700. Therefore, debit accounts payable account with $700.
- Cash is an asset and it is decreased by $1,450. Therefore, credit cash account with $1,450.
4.
To determine
To Record: The
4.
Expert Solution

Explanation of Solution
Record the adjusting entries.
20Y5 | Particulars | Amount ($) | Amount ($) | |
A | 31-Dec |
| 18,000 | |
Allowance for Doubtful Accounts | 18,000 | |||
(To record estimated uncollectible accounts.) | ||||
B | 31-Dec | Cost of Goods Sold | 3,300 | |
Inventory | 3,300 | |||
(To record inventory shrinkage.) | ||||
C | 31-Dec | Insurance Expense | 22,820 | |
Prepaid Insurance | 22,820 | |||
(To record expired insurance.) | ||||
D | 31-Dec | Office Supplies Expense | 3,920 | |
Office Supplies | 3,920 | |||
(To record supplies used during the period.) | ||||
E | 31-Dec |
| 36,000 | |
Depreciation Expense—Office Equipment | 44,000 | |||
Depreciation Expense—Store Equipment | 5,000 | |||
Accumulated Depreciation—Buildings | 36,000 | |||
Accumulated Depreciation—Office Equipment | 44,000 | |||
Accumulated Depreciation—Store Equipment | 5,000 | |||
(To record depreciation for the period.) | ||||
20Y5 | Particulars | Amount ($) | Amount ($) | |
F | 31-Dec | Amortization Expense—Patents | 6,000 | |
Patents | 6,000 | |||
(To record patent amortization) | ||||
G | 31-Dec | Depletion Expense | 30,000 | |
Accumulated Depletion | 30,000 | |||
(To record depletion.) | ||||
H | 31-Dec | Vacation Pay Expense | 10,500 | |
Vacation Pay Payable | 10,500 | |||
(To record vacation pay for the period.) | ||||
I | 31-Dec | Product Warranty Expense | 76,000 | |
Product Warranty Payable | 76,000 | |||
(To record product warranty for the period.) | ||||
J | 31-Dec | Interest Receivable | 1,875 | |
Interest Revenue | 1,875 | |||
(To record interest earned on note receivable.) |
Table (4)
5.
To determine
To Prepare: The
5.
Expert Solution

Explanation of Solution
Prepare the balance sheet.
K Company | |||
Balance Sheet | |||
As on December 31, 20Y5 | |||
Assets | Amount ($) | Amount ($) | Amount ($) |
Current assets: | |||
Petty cash | 4,500 | ||
Cash | 243,960 | ||
Notes receivable | 100,000 | ||
Accounts receivable | 470,000 | ||
Allowance for doubtful accounts | (16,000) | ||
Accounts receivable, net | 454,000 | ||
Inventory | 320,000 | ||
Interest receivable | 1,875 | ||
Prepaid insurance | 45,640 | ||
Office supplies | 13,390 | ||
Total current assets | 1,183,365 | ||
Property, plant, and equipment: | |||
Land | 654,925 | ||
Buildings | 900,000 | ||
Accumulated depreciation—buildings | (36,000) | ||
Book value—buildings | 864,000 | ||
Office equipment | 246,000 | ||
Accumulated depreciation— office equipment | (44,000) | ||
Book value—office equipment | 202,000 | ||
Store equipment | 112,000 | ||
Accumulated depreciation— store equipment | (5,000) | ||
Book value—store equipment | 107,000 | ||
Mineral rights | 546,000 | ||
Accumulated depletion—mineral rights | (30,000) | ||
Book value—mineral rights | 516,000 | ||
Total property, plant, and equipment Intangible assets: | 2,343,925 | ||
Patents | 42,000 | ||
Total assets | 3,569,290 | ||
Liabilities | |||
Current liabilities: | |||
Social security tax payable | 25,470 | ||
Medicare tax payable | 4,710 | ||
Employees federal income tax payable | 40,000 | ||
State unemployment tax payable | 270 | ||
Federal unemployment tax payable | 30 | ||
Salaries payable | 157,000 | ||
Accounts payable | 131,600 | ||
Interest payable | 28,000 | ||
Product warranty payable | 76,000 | ||
Vacation pay payable (current portion) | 7,140 | ||
Notes payable (current portion) | 70,000 | ||
Total current liabilities | 540,220 | ||
Long-term liabilities: | |||
Vacation pay payable | 3,360 | ||
Unfunded pension liability | 50,700 | ||
Notes payable | 630,000 | ||
Total long-term liabilities | 684,060 | ||
Total liabilities | 1,224,280 | ||
Stockholders’ Equity | |||
Mr. J’s Capital | 2,345,010 | ||
Total stockholders’ equity | 2,345,010 | ||
Total liabilities and stockholders’ equity | 3,569,290 |
Table (5)
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Activity Based Costing - practice problem
Fontillas Instrument, Inc. manufactures two products: missile range instruments and
space pressure gauges. During April, 50 range instruments and 300 pressure gauges
were produced, and overhead costs of $89,500 were estimated. An analysis of
estimated overhead costs reveals the following activities.
Activities
1. Materials handling
2. Machine setups
Cost Drivers
Number of requisitions
Number of setups
Total cost
$35,000
27,500
3. Quality inspections
Number of inspections
27,000
$89.500
The cost driver volume for each product was as follows:
Cost Drivers
Instruments
Gauge
Total
Number of requisitions
400
600
1,000
Number of setups
200
300
500
Number of inspections
200
400
600
Insructions
(a) Determine the overhead rate for each activity.
(b) Assign the manufacturing overhead costs for April to the two products using
activity-based costing.
Bodhi Company has three cost pools and two doggie products (leashes and collars). The activity cost pool
of ordering has the cost drive of purchase orders. The activity cost pool of assembly has a cost driver of
parts. The activity cost pool of supervising has the cost driver of labor hours. The accumulated data
relative to those cost drivers is as follows:
Expected Use of
Estimated
Cost Drivers by Product
Cost Drivers
Overhead
Leashes
Collars
Purchase orders
$260,000
70,000
60,000
Parts
400,000
300,000
500,000
Labor hours
300,000
15,000
10,000
$960,000
Instructions: (a) Compute the activity-based overhead rates. (b) Compute the costs assigned to leashes
and collars for each activity cost pool. (c) Compute the total costs assigned to each product.
Chapter 11 Solutions
Accounting, Chapters 14-26
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