Question

Comprehensive Problem 3
Part 1:

Selected transactions completed by Kornett Company during its first fiscal year ended Dec. 31, 20Y8, were as follows:

1. Journalize the selected transactions. Assume 360 days per year.

If no entry is required, select "No entry required" from the dropdown and leave the amount boxes blank. For a compound transaction, if an amount box does not require an entry, leave it blank.

Jan. 3: Issued a check to establish a petty cash fund of $4,500.

Description	Debit	Credit
Petty Cash
Cash

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.

Description	Debit	Credit
Office Supplies
Miscellaneous Selling Expense
Miscellaneous Administrative Expense
Cash

Apr. 14: Purchased $31,300 of merchandise on account, terms, n/30. The perpetual inventory system is used to account for inventory.

Description	Debit	Credit
Merchandise Inventory
Accounts Payable

May 13: Paid the invoice of Apr. 14.

Description	Debit	Credit

May 17: Received cash from daily cash sales for $21,200. The amount indicated by the cash register was $21,240.

Description	Debit	Credit

June 2: Received a 60-day, 8% note for $180,000 on the Ryanair account.

Description	Debit	Credit

Aug. 1: Received amount owed on June 2 note plus interest at the maturity date.

Description	Debit	Credit

Aug. 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.)

Description	Debit	Credit

Sept. 15: Reinstated the Finley account written off on Aug. 24 and received $1,400 cash in full payment.

Description	Debit	Credit

Sept. 15: Purchased land by issuing a $670,000, 90-day note to Zahorik Co., which discounted it at 9%.

Description	Debit	Credit

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 Oct. 17.

Description	Debit	Credit

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 0.6% Amount subject to unemployment taxes: State unemployment $5,000 Federal unemployment 5,000

Nov. 30: Journalized the employer's payroll taxes on the payroll.

Description	Debit	Credit

Description	Debit	Credit

Dec. 14: Journalized the payment of the Sept. 15 note at maturity.

Description	Debit	Credit

Dec. 31: The pension cost for the year was $190,400, of which $139,700 was paid to the pension plan trustee.

Description	Debit	Credit

Answer 1

1)	Journal Entries
Date	Accounts	Debit$	Credit$
03-Jan	Petty cash	$4,500
	Cash		$4,500
26-Feb	Office supplies	$1,680
	Miscellaneous Selling Expense	$570
	Miscellaneous Administrative Expense	$880
	Cash		$3,130
14-Apr	Merchandise Inventory	$31,300
	Accounts Payable		$31,300
13-May	Accounts Payable	$31,300
	Cash		$31,300
17-May	Cash	$21,200
	Cash short and over	$40
	Sales		$21,240
02-Jun	Notes Receivable	$180,000
	Accounts Receivable—Ryanair		$180,000
01-Aug	Cash	$182,400
	Notes Receivable		$180,000
	Interest Revenue		$2,400
24-Aug	Cash	$7,600
	Allowance for Doubtful Accounts	$1,400
	Accounts Receivable—Finley		$9,000
15-Sep	Accounts Receivable—Finley	$1,400
	Allowance for Doubtful Accounts		$1,400
	Cash	$1,400
	Accounts Receivable—Finley		$1,400
15-Sep	Land	$654,925
	Interest Expense	$15,075
	Notes Payable		$670,000
	($670,000 * 90/360 * 9%).
17-Oct	Cash	$135,000
	Notes Receivable	$100,000
	Accumulated Depreciation-Office Equipment	$64,000
	Loss on Sale of Office Equipment	$21,000
	Office Equipment		$320,000
30-Nov	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-Nov	Payroll Tax Expense	$16,229
	Social Security Tax Payable		$12,735
	Medicare Tax Payable		$3,184
	State Unemployment Tax Payable+		$270
	Federal Unemployment Tax Payable*		$40
	+$5,000 * 5.4%
	*$5,000 * 0.8%
14-Dec	Notes Payable	$670,000
	Cash		$670,000
31-Dec	Pension Expense	$190,400
	Cash		$139,700
	Unfunded Pension Liability		$50,700
	(Pension cost of $190,400 funded at $139,700)