Question

Create Journal entries for the following:					Account Balances
					June 30, 2016	June 30, 2017
Debits
Cash					$       361,700	$       880,550
Accounts Receivable					100,000	125,000
Marketable Securities (at cost)					11,700	13,000
Allowance for Change in Value					1,500	1,800
Construction in Process					168,750	405,000
Prepaid Expenses					45,000	10,000
Investments (long-term)					-	13,500
Leased Equipment					-	20,000
Building					30,000	-
Deferred tax asset					5,375	2,200
Land					10,500	10,500
Discount on Bonds Payable					-	1,305
Totals					734,525	1,482,855
Credits
Allowance for doubtful accounts					$            6,000	$            4,500
Accounts Payable					87,500	210,000
Deferred tax liability					1,000	3,300
Income Taxes Payable					3,500	9,000
Note Payable (long-term)					3,500	-
Accumulated Depreciation on Building					2,500	-
Accumulated Depreciation on Leased Asset					-	3,000
Lease obligation					-	18,000
Interest payable on lease obligation					-	1,800
Interest payable (Bonds)					-	1,800
Bonds payable					-	45,000
Billings on contruction in process					150,000	325,000
Pension liability					150,000	400,000
Convertible preferred stock, $100 par					9,000	-
Common Stock, $10 par					14,000	24,500
Additional Paid-in Capital					8,700	13,700
Unrealized Increase in Value of Marketable Securities					1,500	1,800
Retained Earnings					297,325	421,455
Totals					734,525	1,482,855
Additional information:
a. Dividends declared and paid totaled $650.
					10,500
b. 300 shares of common stock (at par) were issued for cash.				3000	5000	8000
c. On July 1, 2016, convertible preferred stock that had originally been issued at par value were
converted into 500 shares of common stock. The book value method was used to account for the
conversion.
d. The long-term note payable was paid by issuing 250 shares of common stock at the beginning of the
fiscal year.
e. Short-term marketable securities were purchased at a cost of $1,300. The portfolio was increased by
$300 to a $14,800 fair value at year-end by adjusting the related allowance account.
f. During the year, a 30% interest in Ricochet Co. was purchased as an investment for $9,500. Ricochet
reported $20,000 in net income for the year and paid dividends of $2,000 to Smart.
g. $5,000 of accounts receivable were written off as uncollectible during the year.
h. Smart’s inventory consists of Construction-in-Process in excess of the Billings on
Construction-in-Process account balance.
i. A building was destroyed by fire during the year and insurance proceeds of $26,000 were collected.
j. The 12% bonds payable were issued on February 28, 2017, at 97. They mature on February 28, 2027.
The company uses the straight-line method to amortize bond premiums and discounts.
k. Smart recorded pension expense of $350,000 for the year.
l. A lease agreement was signed on July 1st, 2016 for the use of equipment worth $20,000. The
company determined that the transaction should be recorded as a capital lease.

Answer 1

		Debit	Credit
a.	Retained Earnings	650
	Cash		650
b.	Cash	3000
	Common stock		3000
c.	Convertible preferred stock, $100 par	9000
	Common stock (500*10)		5000
	Additional Paid-in Capital(9000-5000)		4000
d.	Note Payable (long-term)	3500
	Common stock (250*10)		2500
	Additional Paid-in Capital(3500-2500)		1000
e.	Marketable securities	1300
	Cash		1300
	Allowance for Change in Value	300
	Unrealized Increase in Value of Marketable Securities		300
f.	Investments in Ricochet Co. (long-term)	9500
	Cash		9500
	Investments in Ricochet Co. (long-term)	6000
	Investment Income		6000
	(20000*30%)(30% income accrued)
	Cash	2000
	Investments in Ricochet Co. (long-term)		2000
	(dividends recd.)
g.	Allowance for doubtful accounts	5000
	Accounts receivables		5000
	Bad debt expense	3500
	Allowance for doubtful accounts		3500
	(above 5000+cl. 4500-Op.6000)
h.
i	Cash	26000
	Accumulated depreciation on building	2500
	Loss due to fire	1500
	Building		30000
j.	Cash (45000/100*97)	43650
	Discount on Bonds Payable	1350
	Bonds payable		45000
	Interest expense(45000*12%/12*4)	1800
	Interest payable(1800-45)		1755
	Discount on Bonds Payable(1350/10/12*4)		45
k.	Pension expense	350000
	Pension Liability		350000
	Pension liability	100000
	Cash		100000
	(150000+350000-400000)
l.	Leased equipment	20000
	Lease obligation		20000
	Lease obligation	2000
	Cash		2000
	Interest expense	1800
	Interest payable on lease obligation		1800
	Depreciation-Leased asset	3000
	Accumulated Depreciation on Leased asset		3000
	Operating expenses	35000
	Prepaid expense		35000
	Expensing the prepaid ones (45000-10000)