Question

These information presented at North Company throughout 2017:

 Jan. 1 Bank of America agree to lend North Co. $41,000 and carry a 9% interest rate for one year maturing on January 1, 2018.

 Jan. 2 North Co. accepted a 4-month, 8% note from Panda Company in payment of Panda’s $1,200 account.

 Jan. 3 North Co. wrote off as uncollectible the accounts of Wooden Corporation ($450) and Zajel Company ($280).

 Jan. 11 North Co. sold for $28,000 to Fire Co. on account inventory that cost $19,600. Terms 2/10, n/30.

 Jan. 15 North Co. sold inventory that cost $700 to Mark Harries for $1,000. Harries charged this

amount on his Visa Bank card. The service fee charged North Co. by the bank is 3%.

 Jan. 17 Fire Co. returns merchandise worth $1000.

 Jan. 24 North Co. received payment in full ($280) from Zajel Company on the account written off on

January 3.

 Jan. 25 receives $22,900 payment from Fire Co.

 On May 1, 2017, North Co. purchased equipment for $21,200 plus sales taxes of $1,600 (all paid in cash).

 July. 1 North Co. sold for $3,500 equipment which originally cost $5,000. Accumulated depreciation on

this equipment at January 1, 2017, was $1,800; 2017 depreciation prior to the sale of the equipment was

$450.

 Aug. 1 North Co. sold for $440,000 cash, inventory and collected $28,600 in sales taxes.

 Sep 30, North Co. sold on account $9,000 of inventory that cost $6,300.

 Nov. 30, the payroll for the month consists of salaries and wages of $60,000. All salaries and wages are

subject to 7.65% FICA taxes. A total of $8,900 federal income taxes are withheld. The salaries and wages

are paid on Jan 1, 2018.

 Dec. 1 North Co. received an advanced amount of $6,000 rent for 3 months.

Adjustment data:

 North Co. estimates that uncollectible accounts receivable at year-end is $3,500.

 The cost of the building $150,000 is being depreciated using the straight-line method over 30 years.

The salvage value is $30,000.

 The car owned this year is being depreciated using double –declining-balance method over

 5 years by using 20% rate for depreciate the car. The car cost $50,000.

 The equipment purchased on May 1, 2017, is being depreciated using the straight-line method over 5

years, with a salvage value of $1,800.

 The patent was acquired on January 1, 2017, $9,000 and has a useful life of 10 years from that date.

 The unearned rent revenue of $6,000 was received on December 1, 2017, for 3 months’ rent.

 The short-term note is dated January 1, 2017, and carry a 9% interest rate.

Answer 1

In the books of North Co. :

Date	Account Titles	Debit	Credit
2017		$	$
Jan 1	Cash	41,000
	Note Payable		41,000
Jan 2	Note Receivable	1,200
	Accounts Receivable		1,200
Jan 3	Allowance for Doubtful Accounts	730
	Accounts Receivable: Wooden Corporation		450
	Accounts Receivable: Zajel Company		280
Jan 11	Accounts Receivable : Fire Co.	28,000
	Sales		28,000
Jan 11	Cost of Goods Sold	19,600
	Inventory		19,600
Jan 15	Cash	970
	Credit Card Charges	30
	Sales		1,000
Jan 15	Cost of Goods Sold	700
	Inventory		700
Jan 17	Sales Returns and Allowances	1,000
	Accounts Receivable: Fire Co.		1,000
Jan 17	Inventory ( 19,600 / 28,000 x 1,000)	700
	Cost of Goods Sold		700
Jan 24	Accounts Receivable	280
	Allowance for Doubtful Accounts		280
Jan 24	Cash	280
	Accounts Receivable		280
Jan 25	Cash	22,900
	Accounts Receivable: Fire Co.		22,900
May 1	Equipment	22,800
	Cash		22,800
May 1	Cash	1,232
	Note Receivable		1,200
	Interest Revenue		32
July 1	Depreciation Expense	450
	Accumulated Depreciation: Equipment		450
July 1	Cash	3,500
	Accumulated Depreciation : Equipment	2,250
	Equipment		5,000
	Gain on Disposal of Equipment		750
Aug 1	Cash	468,600
	Sales Tax Payable		28,600
	Sales		440,000

Contd.

Sep 30	Accounts Receivable	9,000
	Sales		9,000
Sep 30	Cost of Goods Sold	6,300
	Inventory		6,300
Nov 30	Salaries and Wages Expense	60,000
	FICA Taxes Payable		4,590
	Federal Income Taxes Payable		8,900
	Salaries and Wages Payable		46,510
Dec 1	Cash	6,000
	Unearned Rent Revenue		6,000
Dec 31	Adjusting Entries:
a.	Bad Debt Expense	???
	Allowance for Doubtful Accounts		???
b.	Depreciation Expense	4,000
	Accumulated Depreciation : Buildings		4,000
c.	Depreciation Expense	10,000
	Accumulated Depreciation: Car		10,000
d.	Depreciation Expense	2,800
	Accumulated Depreciation : Equipment		2,800
e.	Amortization Expense	900
	Patents		900
f.	Unearned Rent Revenue	2,000
	Rent Revenue		2,000
g.	Interest Expense	3,690
	Interest Payable		3,690