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BUS ADM-201 Fall 2014 EXTRA CREDIT TWO Due in DS week of Nov 17
NOTE: You must complete all requirements a through g to receive any credit.
Partial credit will only be given if you complete everything but make mistakes.
Aberkonkie & Fitch Corporation prepares quarterly financial statements. The balance sheet
at 12/31/13 is presented below.
Balance
Sheet
12/31/2013
Cash
$ 24,300
Accounts payable
$ 12,370
Accounts receivable
22,400
Common stock
90,000
Allowance for doubtful
accounts
(1,200)
Retained earnings
53,130
Equipment
20,000
Accumulated
depreciation - equipment
(15,000)
Land
20,000
Building
100,000
Accumulated
depreciation - building
(15,000)
$ 155,500
$155,500
During the first quarter of 2014, the following transactions occurred:
1. Aberkonkie & Fitch performed services during the first quarter for $140,000 on account.
2. On 2/1/14, Aberkonkie & Fitch collected fees of $12,000 in advance for $1,000 of services to
be performed each month from 2/1/14 to 1/31/15.
3. On 2/1/14, Aberkonkie & Fitch purchased computer equipment for $9,000 plus sales taxes
of $600. $3,000 cash was paid with the rest on account. Check #455 was used.
4. Aberkonkie & Fitch collected $133,000 on 3/5/14 from customers on account.
5. Aberkonkie & Fitch paid $16,370 on accounts payable. Check #456 was used.
6. Paid other operating expenses of $97,525. Check #457 was used.
7. Acquired a patent with a 10-year life for $9,600 cash on 3/1/14. Check #458 was used.
8. Wrote off a customer receivable of $200 who went bankrupt.
9. On 3/31/14, Aberkonkie & Fitch sold for $1,620 cash equipment which originally cost
$11,000. It had an estimated life of 5 years and salvage of $1,000. Accumulated
depreciation as of 12/31/13 was $8,000 using the straight line method. Record depreciation
on the equipment sold, then record the sale.
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10. AJE: Record revenue earned from item 2 above.
11. AJE: $26,000 of accounts receivable at 3/31/14 are not due yet. The bad debt percentage
for these is 4%. The balance of A/R are past due. The bad debt percentage for these is
23.75%. Record bad debt expense.
HINT: You will need to compute the balance in accounts receivable before calculating this.
12. AJE: Depreciation is recorded on the equipment still owned at 3/31/14. The new equipment
purchased in February is being depreciated on a double declining basis over 5 years and
salvage value was estimated at $1,000. The old equipment still owned is being
depreciated over a 10 year life using straight line with no salvage value.
13. AJE: Depreciation is recorded on the building on a straight-line basis based on a 30-year
life and a salvage value of $10,000.
14. AJE: Amortization is recorded on the patent.
15. The company reconciles its bank statement every quarter. Information from the 12/31/13
Bank Reconciliation is:
Deposit in transit:
12/30/13
$5,000
Outstanding Checks
#440
3,444
#452
333
#453
865
#454
5,845
The Bank statement received for the quarter ended 3/31/14 is as follows:
Beginning balance per bank
$ 29,787
Deposits: 1/2/14 $5,000, 2/2/14 $12,000, 3/6/14 $133,000
150,000
Checks: #452 $333, #453 $865, #456 $16,370, #457 $97,525
(115,093)
Debit memo: Bank service charge (Record as operating expense)
(
100)
Ending bank balance
$ 64,594
16. AJE: The income tax rate is 30%. This amount will be paid when the tax return is due in
April. Hint: Prepare the income statement up to income before taxes and multiply by 30%
to compute the amount.
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REQUIRED: Print out the solution pages for the general ledger, journal and worksheet that
follow and enter the following transactions. I suggest that you use a pencil.
a. Enter the transactions 1-9 in the general journal provided on the following pages.
b. Enter the 12/31/13 balances in ledger accounts. Use the ledger account running
balance format accounts provided on the following pages.
c. Post the journal entries to the ledger accounts for items 1 – 9.
d. Prepare an unadjusted trial balance at March 31 and enter on the worksheet. Then
complete the other worksheet columns. (See below.)
Worksheet requirement: Using your unadjusted trial balance above and the data for
adjusting entries, prepare a 10 column worksheet similar to the one on page in the
chapter 4 appendix of your text.
e. Prepare a bank reconciliation in good form. (Item 15 above.) Use your own paper.
Record the necessary AJE.
f. Journalize and post all other adjusting entries. (Items 10 - 16)
g. Prepare an income statement and a retained earnings statement for the quarter
ended 3/31/14 and a classified balance sheet at 3/31/14. Use your own paper. (No
formatted sheets are supplied as we did for the other items.)
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h. EXTRA CREDIT TWO SOLUTION – Name ________________________
DS
____________
Part a, e and f
Extra Credit 2 – General Journal
a.1.
Debit
a.2.
a.3.
a.4.
a.5.
a.6.
a.7.
a.8.
a.9.
a.10.
a.11.
a.12.
a.13.
a.14.
a.15.
a.16.
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Credit
Part b, c and d
General Ledger
b.
CASH
DR
CR
BALANCE
DR
CR
BALANCE
DR
CR
BALANCE
Beginning
item 2
item 3
item 4
item 5
item 6
item 7
item 9
Item 15
b.
ACCOUNTS RECEIVABLE
Beginning
item 1
item 4
item 8
b.
ALLOW FOR DOUBTFUL
ACCTS
Beginning
item 8
item 11
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b.
EQUIPMENT
DR
CR
BALANCE
DR
CR
BALANCE
DR
CR
BALANCE
DR
CR
BALANCE
DR
CR
BALANCE
DR
CR
BALANCE
Beginning
Item 3
Item 9
b.
ACCUM DEPR EQUIPMENT
Beginning
item 9
item 9
Item 12
b.
LAND
Beginning
b.
BUILDING
Beginning
b.
ACCUM DEPR BUILDING
Beginning
item 13
b.
PATENTS
item 7
item 14
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b.
ACCOUNTS PAYABLE
DR
CR
BALANCE
DR
CR
BALANCE
DR
CR
BALANCE
DR
CR
BALANCE
DR
CR
BALANCE
DR
CR
BALANCE
DR
CR
BALANCE
Beginning
item 3
item 5
b.
UNEARNED REVENUE
item 2
item 10
b.
INCOME TAXES PAYABLE
item 16
b.
COMMON STOCK
Beginning
b.
RETAINED EARNINGS
Beginning
b.
SERVICE REVENUE
item 1
item 10
b.
OPERATING EXPENSES
item 6
Item 15
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b.
DEPRECIATION EXPENSE
DR
CR
BALANCE
DR
CR
BALANCE
DR
CR
BALANCE
DR
CR
BALANCE
DR
CR
BALANCE
item 9
item 12
item 13
b.
AMORTIZATION EXPENSE
item 14
b.
LOSS ON DISPOSAL
item 9
b.
BAD DEBT EXPENSE
item 11
b.
INCOME TAX EXPENSE
item 16
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Worksheet (d)
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