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Name: ____________ BUS ADM 201 Intro to Financial Accounting

TA: ____________ Spring 2019


Disc #:____________ EXTRA CREDIT II
Hardcopy due to your TA by 11:59pm on 4/20
GRADING: Worth up to 15 points. Carefully READ the instructions on page 3 first. Partially completed
problems will earn no credit—that means all requirements must be FULLY completed. All work must be
completed by hand. If you complete all items as requested, you will earn at least 7.5 points. The remaining points
are dependent upon the accuracy of your answers! Round amounts to the nearest dollar, if applicable.

Jamukha Corporation prepares quarterly financial statements, ending March 31, 2018. The balance sheet at
December 31, 2017, is presented below.
Jamukha Corporation
Balance Sheet
December 31, 2017

Assets Liabilities and Stockholders' Equity


Cash 15,150 Accounts payable 51,075
Accounts receivable 44,750 Common stock 40,000
Allowance for doubtful accounts (4,000) Retained earnings 172,825
Land 45,000
Equipment 60,000
A/D - equipment (15,000)
Building 200,000
A/D - building (82,000)
263,900 263,900

During the first quarter the following transactions occurred:

1. Performed services for $80,000 on account.

2. On February 1, collected fees of $38,100 in advance. $3,175 worth of services are to be performed each
month from February 1, 2018, to January 31, 2019. (Wait to make adjusting entries.)

3. On February 1, purchased equipment for $20,000 plus 5% sales tax. $4,700 cash was paid with the
remaining balance on account. Check #755 was used (hint: use accounts payable for the liability).

4. On March 5, collected $106,250 from customers on account.

5. Paid $61,125 on accounts payable. Check #756 was used.

6. Paid administrative expenses of $48,600. Check #757 was used.

7. Acquired a patent with a 10-year life for $17,900 cash on March 1. Check #758 was used.

8. Wrote off a receivable of $2,300 from a customer who went bankrupt.


9. On March 31, Jamukha Corp. sold for $15,400 cash equipment, which originally cost $22,000. It had an
estimated life of 10 years and a salvage of $2,000. Accumulated depreciation as of December 31, 2017,
was $5,600 using the straight line method. (1) Record depreciation on the equipment sold, (2) record the
sale.

Adjusting Journal Entries:

10. Record revenue earned from item 2 above.

11. Jamukha Corp. estimated that 6.2% of its revenues will end up uncollected. Record bad debt expense.
Hint: You will need to calculate the revenue balance before calculating bad debt expense. You should
do this by looking at the ledger after posting entries 1-10.

12. Record depreciation on the equipment as of March 31. The new equipment purchased in February is being
depreciated using the double declining balance method over 5 years. The equipment has an estimated
salvage value of $1,000. The equipment that was on the books on December 31, 2017, and that is still
owned by Jamukha is being depreciated over a 10-year life using straight line with no salvage value.

13. Depreciation is recorded on the building on a straight-line basis using a 20-year life and a salvage value of
$4,000.

14. Amortization is recorded on the patent.

15. The company reconciles its bank statement every quarter. Information from the December 31, 2017, bank
reconciliation is provided below. Make the necessary journal entry. You will need the facts in this item to
complete the bank reconciliation for Requirement (e). There were no errors.

Deposit in transit 12/30/17 $4,100

Outstanding Checks #740 $2,333


#752 400
#753 800
#754 7,500

The bank statement received for the quarter ended March 31, 2018, was:
Beginning balance per bank $ 22,083
Deposits: 1/2/18 $4,100; 2/2/18 $38,100; 3/6/18 $106,250 148,450
Checks: #752 $400; #753 $800; #756 $61,125; #757 $48,600 ( 110,925)
Debit memo: Bank service charge (Record as “Administrative expense.”) ( 75)
Ending balance per bank $ 59,533

16. Jamukha’s income tax rate is 32%. The tax will be paid when the tax return is due in April.
Hint: Prepare the income statement up to income before taxes and multiply by 32% to compute the
amount of income tax expense. Round the tax expense to the nearest whole dollar.

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Instructions

Print out the solution pages for the general journal, ledger, and worksheet that follow and enter the following
transactions. I suggest that you use a pencil. You must complete all requirements (a) through (h) to receive any
credit. Turn in completed work to your TA in discussion, or in their mailbox by midnight, Saturday April 20th.

a. Enter the December 31, 2017, balances in ledger accounts. Use the ledger account running balance
format accounts provided on the following pages. Look at the cash account for an example of how to use
the running balance ledger. I have completed the first two lines of it for you. It is a good idea to keep
track of whether your balance column is a debit or a credit, particularly for contra accounts.
b. Enter the transactions numbered 1-9 in the general journal provided on the following pages.
c. Post the journal entries to the ledger accounts for items 1-9.
d. 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 (d) above and the data for adjusting entries,
(e) and (f) below, prepare a 12 column worksheet. Use the example for Sierra Corporation from Chapter 4 in
the text (Illustration 4A-1 in Chapter 4 Appendix) for guidance. You will not receive any credit if the
worksheet is incomplete.

e. Prepare a bank reconciliation in good form. (Item 15 above.) Use your own paper. Record the necessary
AJE in the journal, the ledger, and the worksheet.
f. Journalize and post all other adjusting entries. (Items 10-16 above.) Add them to the worksheet.
g. Prepare an income statement and a retained earnings statement for the quarter ended March 31, 2018,
and a classified balance sheet at March 31, 2018. Appropriate name the gain/loss account on your
income statement (you must call it either a gain or a loss, not both.) Use your own paper. (No formatted
sheets are supplied as for the other items.)
h. Journalize closing entries. You are not required to post the closing entries or prepare a post-closing trial
balance for this assignment.

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EXTRA CREDIT II SOLUTION Name _____________________
Requirements (b), (e), and (f)
Extra Credit II – General Journal Debit Credit
a.1.

a.2.

a.3.

a.4.

a.5.

a.6.

a.7.

a.8.

a.9.

a.10.

a.11.

a.12.

a.13.

a.14.

a.15.

a.16.

cl.1.

cl.2.

cl.3.

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General Ledger

Requirements (a), (c), and (d)

CASH DR CR BALANCE
Beginning 15,150 15,150

ACCOUNTS RECEIVABLE DR CR BALANCE


Beginning

ALLOWANCE FOR DOUBTFUL ACCOUNTS DR CR BALANCE


Beginning

LAND DR CR BALANCE
Beginning

EQUIPMENT DR CR BALANCE
Beginning

ACCUM DEPRECIATION - EQUIPMENT DR CR BALANCE


Beginning

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General Ledger - continued

BUILDING DR CR BALANCE
Beginning

ACCUM DEPRECIATION - BUILDING DR CR BALANCE


Beginning

PATENTS DR CR BALANCE

ACCOUNTS PAYABLE DR CR BALANCE


Beginning

UNEARNED SERVICE REVENUE DR CR BALANCE

INCOME TAXES PAYABLE DR CR BALANCE

COMMON STOCK DR CR BALANCE


Beginning

RETAINED EARNINGS DR CR BALANCE


Beginning

SERVICE REVENUE DR CR BALANCE

ADMINISTRATIVE EXPENSES DR CR BALANCE

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General Ledger - continued

DEPRECIATION EXPENSE DR CR BALANCE

AMORTIZATION EXPENSE DR CR BALANCE

GAIN/LOSS ON DISPOSAL DR CR BALANCE

BAD DEBT EXPENSE DR CR BALANCE

INCOME TAX EXPENSE DR CR BALANCE

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Worksheet (d), (e), (f)