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Financial Accounting
14th Edition
ISBN: 9781305088436
Author: Carl Warren, Jim Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Concept explainers
Question
Chapter 11, Problem 3CPP
1.
To determine
Comprehensive Problem
To Record: The journal entries.
1.
Expert Solution
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Explanation of Solution
The following are the journal entries.
2016 | 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 | 16,229 | ||
Social Security Tax Payable | 12,735 | |||
Medicare Tax Payable | 3,184 | |||
State | 270 | |||
Federal Unemployment Tax Payable | 40 | |||
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
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Explanation of Solution
Prepare the bank reconciliation statement for Company K.
K Company | ||
Bank Reconciliation December 31, 2016 | ||
Particulars | Amount ($) | Amount ($) |
Balance according to bank statement | 283,000.00 | |
Adjustments: | ||
Deposit in transit, not recorded by bank | 29,500.00 | |
Deduct outstanding checks | (68,540.00) | |
Total adjustments | (39,040.00) | |
Adjusted balance | 243,960.00 | |
Balance according to company’s records | 245,410.00 | |
Adjustments: | ||
Bank service charges | (750.00) | |
Error in recording check | (700.00) | |
Total adjustments | (1,450.00) | |
Adjusted balance | 243,960.00 |
Table (2)
3.
To determine
To Record: The bank service charges using miscellaneous administrative expense account.
3.
Expert Solution
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Answer to Problem 3CPP
Record the
2016 | 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 $1,450.
4.
To determine
To Record: The
4.
Expert Solution
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Explanation of Solution
Record the adjusting entries.
2016 | Particulars | Amount ($) | Amount ($) | |
a | 31-Dec | 18,000 | ||
Allowance for Doubtful Accounts | 18,000 | |||
To record estimated uncollectible accounts | ||||
b | 31-Dec | Cost of Goods Sold | 3,300 | |
Inventory | 3,300 | |||
To record inventory shrinkage. | ||||
c | 31-Dec | Insurance Expense | 22,820 | |
Prepaid Insurance | 22,820 | |||
To record expired insurance. | ||||
d | 31-Dec | Office Supplies Expense | 3,920 | |
Office Supplies | 3,920 | |||
To record supplies used during the period. | ||||
e | 31-Dec | 36,000 | ||
Depreciation Expense—Office Equipment | 44,000 | |||
Depreciation Expense—Store Equipment | 5,000 | |||
Accumulated Depreciation—Buildings | 36,000 | |||
Accumulated Depreciation—Office Equipment | 44,000 | |||
Accumulated Depreciation—Store Equipment | 5,000 | |||
To record depreciation for the period. | ||||
2016 | Particulars | Amount ($) | Amount ($) | |
f | 31-Dec | Amortization Expense—Patents | 6,000 | |
Patents | 6,000 | |||
To record patent amortization | ||||
g | 31-Dec | Depletion Expense | 30,000 | |
Accumulated Depletion | 30,000 | |||
To record depletion. | ||||
h | 31-Dec | Vacation Pay Expense | 10,500 | |
Vacation Pay Payable | 10,500 | |||
To record vacation pay for the period. | ||||
i | 31-Dec | Product Warranty Expense | 76,000 | |
Product Warranty Payable | 76,000 | |||
To record product warranty for the period. | ||||
j | 31-Dec | Interest Receivable | 1,875 | |
Interest Revenue | 1,875 | |||
To record interest earned on note receivable. |
Table (4)
5.
To determine
To Prepare: The
5.
Expert Solution
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Explanation of Solution
Prepare the balance sheet.
K Company | |||
Balance Sheet | |||
As on December 31, 2016 | |||
Assets | Amount ($) | 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 | 13,400 | ||
Total current assets | 1,183,375 | ||
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 | 3,569,300 | ||
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 | 40 | ||
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 | 540,230 | ||
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 | 1,224,290 | ||
Stockholders’ Equity | |||
Common stock | 500,000 | ||
Retained earnings | 1,845,010 | ||
Total stockholders’ equity | 2,345,010 | ||
Total liabilities and stockholders’ equity | 3,569,300 |
Table (5)
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Chapter 11 Solutions
Financial Accounting
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