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Selected transactions completed by Kornett Company during its first fiscal year ended December 31, 20Y5, were...

Selected transactions completed by Kornett Company during its first fiscal year ended December 31, 20Y5, 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 1/10, n/30. The perpetual inventory system is used to account for inventory.
May 13 Paid the invoice of April 14 after the discount period had passed.
17 Received cash from daily cash sales for $21,200. The amount indicated by the cash register was $21,240.
Jun. 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. Assume a 360-day year.
24 Received $7,600 on the Finley account and wrote off the remainder owed on a $9,000 accounts receivable balance. (The allowance method is used in accounting for uncollectible receivables.)
Sep. 15 Reinstated the Finley account written off on August 24 and received $1,400 cash in full payment. (Record as two entries.)

Record the following on journal page 22.

Sep. 15 Purchased land by issuing a $670,000, 90-day note to Zahorik Co., which discounted it at 9%. Assume a 360-day year.
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:
Salaries: Deductions:
Sales salaries $135,000 Income tax withheld $39,266
Office salaries 77,250 Social security tax withheld 12,735
$212,250 Medicare tax withheld 3,184
Unemployment Tax rates:
State unemployment 5.4%
Federal unemployment 0.8%
Amount subject to unemployment taxes:
State unemployment $5,000
Federal unemployment 5,000
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.
Required:
1. Journalize the selected transactions, starting on page 21 of the journal.*
2. Based on the following data, prepare a bank reconciliation for December of the current year. Refer to the Labels and Amount Descriptions list for exact wording of text entries. Enter all amounts as positive numbers.
Balance according to the bank statement at December 31, $283,000.
Balance according to the ledger at December 31, $245,410.
Checks outstanding at December 31, $68,540.
Deposit in transit, not recorded by bank, $29,500.
Bank debit memo for service charges, $750.
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 on page 23 of the journal. Use the Miscellaneous Administrative Expense account to record bank service charges. Round your answers to the nearest dollar.
4. Based on the following selected data, journalize the adjusting entries as of December 31 of the current year on page 23 of the journal:
Estimated uncollectible accounts at December 31, $16,000, based on an aging of accounts receivable. The balance of Allowance for Doubtful Accounts at December 31 was $2,000 (debit).
The physical inventory on December 31 indicated an inventory shrinkage of $3,300.
Prepaid insurance expired during the year, $22,820.
Office supplies used during the year, $3,920.
Depreciation is computed as follows:

Residual

Acquisition

Useful Life

Asset

Cost

Value

Date

in Years

Depreciation Method Used

Buildings $900,000 $0 January 2 50 Double-declining-balance
Office Equip. 246,000 26,000 January 3 5 Straight-line
Store Equip. 112,000 12,000 July 1 10 Straight-line
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 8 years.
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.
Vacation pay expense for December, $10,500.
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.
Interest was accrued on the note receivable received on October 17. Assume a 360-day year.
* Refer to the Chart of Accounts for exact wording of account titles. Round your answers to the nearest dollar
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. Be sure to complete the heading of the balance sheet. Enter assets in the order in which they appear in the post-closing trial balance. Refer to information given in the problem and the Labels and Amount Descriptions list for exact wording of text entries. There is no need to include “(current portion)” or a due date with any account titles. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Round your answers to the nearest dollar
The merchandise inventory is stated at cost by the LIFO method.
The product warranty payable is a current liability.
Vacation pay payable:
Current liability: $7,140
Long-term liability: 3,360
The unfunded pension liability is a long-term liability.
Notes payable:
Current liability: $70,000
Long-term liability: 630,000

Kornett Company

POST-CLOSING TRIAL BALANCE

December 31, 20Y5

ACCOUNT TITLE DEBIT CREDIT

1

Petty Cash

4,500.00

2

Cash

243,960.00

3

Notes Receivable

100,000.00

4

Accounts Receivable

470,000.00

5

Allowance for Doubtful Accounts

16,000.00

6

Inventory

320,000.00

7

Interest Receivable

1,875.00

8

Prepaid Insurance

45,640.00

9

Office Supplies

13,400.00

10

Land

654,925.00

11

Buildings

900,000.00

12

Accumulated Depreciation-Buildings

36,000.00

13

Office Equipment

246,000.00

14

Accumulated Depreciation-Office Equipment

44,000.00

15

Store Equipment

112,000.00

16

Accumulated Depreciation-Store Equipment

5,000.00

17

Mineral Rights

546,000.00

18

Accumulated Depletion

30,000.00

19

Patents

42,000.00

20

Social Security Tax Payable

25,470.00

21

Medicare Tax Payable

4,710.00

22

Employees Income Tax Payable

40,000.00

23

State Unemployment Tax Payable

270.00

24

Federal Unemployment Tax Payable

40.00

25

Salaries Payable

157,000.00

26

Accounts Payable

131,600.00

27

Interest Payable

28,000.00

28

Product Warranty Payable

76,000.00

29

Vacation Pay Payable

10,500.00

30

Unfunded Pension Liability

50,700.00

31

Notes Payable

700,000.00

32

Common Stock

500,000.00

33

Retained Earnings

1,845,010.00

34

Totals

3,700,300.00

3,700,300.00

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