BUS ADM-201 Fall 2012 EXTRA CREDIT 2 – Due in DS week of November 26
GRADING: Worth 15 points.
Partially credit will
only be given if you attempt
all requirements a through g listed below.
Aberkonkie & Fitch Corporation prepares quarterly financial statements. The balance sheet at 12/31/12 is presented below.
|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|
|Accumulated depreciation – equipment||(15,000)|
|Accumulated depreciation – building||(15,000)|
|During the first quarter of 2013, the following transactions occurred:|
|1. Aberkonkie & Fitch performed services during the first quarter for $140,000 on account.|
|2. On 2/1/13, Aberkonkie & Fitch collected fees of $12,000 in advance for $1,000 of services to be performed each month from 2/1/13 to 1/30/14.|
|3. On 2/1/13, 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 3/5/13 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 3/1/13. Check #458 was used.|
|8. Wrote off a customer receivable of $200 who went bankrupt.|
|9. On 3/31/13, 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 12/31/12 was $8,000 using the straight line method. Record depreciation on the equipment sold, then record the sale.|
|10. AJE: Record revenue earned from item 2 above.|
|11. AJE: $26,000 of accounts receivable at 3/31/13 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 3/31/13. 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 12/31/12 Bank Reconciliation is:
Deposit in transit: 12/30/12 $5,000
Outstanding Checks #440 3,444
The Bank statement received for the quarter ended 3/31/13 is as follows:
Beginning balance per bank $ 29,787
Deposits: 1/2/13 $5,000, 2/2/13 $12,000, 3/6/13 $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.|
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.
- Enter the transactions 1-9 in the general journal provided on the following pages.
- Enter the 12/31/12 balances in ledger accounts. Use the ledger account running balance format accounts provided on the following pages.
- Post the journal entries to the ledger accounts for items 1 – 9.
- 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 195 in the chapter 4 appendix of your text.
- Prepare a bank reconciliation in good form. (Item 15 above.) Use your own paper. Record the necessary AJE.
- Journalize and post all other adjusting entries. (Items 10 – 16)
- Prepare an income statement and a retained earnings statement for the quarter ended 3/31/13 and a classified balance sheet at 3/31/13. Use your own paper. (No formatted sheets are supplied as we did for the other items.)
EXTRA CREDIT TWO SOLUTION – Name ________________________
Part a, e and f
|Extra Credit 2 – General Journal||Debit||Credit|
Part b, c and d
|b.||ALLOW FOR DOUBTFUL ACCTS||DR||CR||BALANCE|
|b.||ACCUM DEPR EQUIPMENT||DR||CR||BALANCE|
|b.||ACCUM DEPR BUILDING||DR||CR||BALANCE|
|b.||INCOME TAXES PAYABLE||DR||CR||BALANCE|
|b.||LOSS ON DISPOSAL||DR||CR||BALANCE|
|b.||BAD DEBT EXPENSE||DR||CR||BALANCE|
|b.||INCOME TAX EXPENSE||DR||CR||BALANCE|