Comprehensive Problem 9 (Part Level Submission) Debit Credit Income tax expense

Question

Comprehensive Problem 9 (Part Level Submission)

Debit

Credit

Income tax expense was $12,480. It was unpaid at December 31.

a. prepare journal entries for the transactions listed above and adjusting entries.
b. prepare an adjusted trial balance at December 31, 2014.

Prepare a December 31, 2014, balance sheet (List current assets in order of iquidity. List property, plant and equipment in order of land, buildings and equipment.)

Comprehensive Problem 9 (Part Level Submission)

Kenseth Corporation’s unadjusted trial balance at December 1, 2014, is presented below.

Debit

Credit

Cash $25,860 Accounts Receivable 36,060 Notes Receivable 9,600 Interest Receivable –0– Inventory 36,060 Prepaid Insurance 3,750 Land 21,100 Buildings 156,000 Equipment 60,600 Patent 10,080 Allowance for Doubtful Accounts $480 Accumulated Depreciation—Buildings 52,000 Accumulated Depreciation—Equipment 24,240 Accounts Payable 28,300 Salaries and Wages Payable –0– Notes Payable (due April 30, 2015) 12,100 Interest Payable –0– Notes Payable (due in 2020) 35,640 Common Stock 56,500 Retained Earnings 46,280 Dividends 14,400 Sales Revenue 913,000 Interest Revenue –0– Gain on Disposal of Plant Assets –0– Bad Debt Expense –0– Cost of Goods Sold 632,100 Depreciation Expense –0– Insurance Expense –0– Interest Expense –0– Other Operating Expenses 61,030 Amortization Expense –0– Salaries and Wages Expense 101,900 Total $1,168,540 $1,168,540
The following transactions occurred during December.
Dec. 2 Kenseth purchased equipment for $15,600, plus sales taxes of $600 (all paid in cash). 2 Kenseth sold for $3,560 equipment which originally cost $5,200. Accumulated depreciation on this equipment at January 1, 2014, was $1,950; 2014 depreciation prior to the sale of equipment was $450. 15 Kenseth sold for $5,290 on account inventory that cost $3,420. 23 Salaries and wages of $6,350 were paid.
Adjustment data:
1. Kenseth estimates that uncollectible accounts receivable at year-end are $3,890. 2. The note receivable is a one-year, 8% note dated April 1, 2014. No interest has been recorded. 3. The balance in prepaid insurance represents payment of a $3,750, 6-month premium on September 1, 2014. 4. The building is being depreciated using the straight-line method over 30 years. The salvage value is $32,400. 5. The equipment owned prior to this year is being depreciated using the straight-line method over 5 years. The salvage value is 10% of cost. 6. The equipment purchased on December 2, 2014, is being depreciated using the straight-line method over 5 years, with a salvage value of $2,160. 7. The patent was acquired on January 1, 2014, and has a useful life of 9 years from that date. 8. Unpaid salaries at December 31, 2014, total $2,140. 9. Both the short-term and long-term notes payable are dated January 1, 2014, and carry a 10% interest rate. All interest is payable in the next 12 months. 10

Income tax expense was $12,480. It was unpaid at December 31.

a. prepare journal entries for the transactions listed above and adjusting entries.
b. prepare an adjusted trial balance at December 31, 2014.

Prepare a 2014 retained earnings statement (List items that increase retained earnings first.)

Prepare a December 31, 2014, balance sheet (List current assets in order of iquidity. List property, plant and equipment in order of land, buildings and equipment.)

Explanation / Answer

Journal Entries for transactions happened in Dec 14 a. Equipment purchased on 2nd Dec 14 Debit Credit Equipment 15600 Cash 15600 b. On sale of Equipment for $3560 on 2nd Dec 14 Original cost 5200 Less Accum depn on 1st Jan 14 -1950 Less Depn from 1st Jan 14 to date of sale -450 WDV as on 2nd Dec 14 2800 Sale value 3560 Profit on sale of equipment 760 Entry Debit Credit Equipment 5200 Accumulated Depreciation—Equipment 1950 Depreciation 450 Cash 3560 Profit on sale of equipment 760 Total 5960 5960 c. Sale of stocks o n 15th Dec 14 Debit Credit Sales 5290 Cash 5290 Inventory 3420 Cost of Goods Sold 3420 Total 8710 8710 d. Salaries and wages paid on 23rd Dec 14 Salaries and Wages Expense 6350 Cash 6350 Journal entries for the adjustments Debit Credit Bad Debt Expense 3890 Accounts Receivable 3890 (Bad debts written off) Interest Revenue 576 Interest Receivable 576 (Interest on notes at 8% for 9 months) Insurance Expense 2500 Prepaid Insurance 2500 (4 months premium charged off) Depreciation 4120 Accumulated Depreciation—Buildings 4120 (Orig cost less salvage value / 30 years) Depreciation 10186 Accumulated Depreciation—Equipment 10186 (As given by below workings) Equipments as on 1st Dec 14 60,600 Less equipment sold in Dec 14 -5200 Rest of equipments 55,400 Salvage value 5540 Depreciable value 49,860 Depreciation p.a 9972 Equipment purchased on 2nd Dec 14 15600 Salvage value 2160 Depreciable value 13440 Depreciation p.a 2688 Depreciation for Dec 14 for 29 days 214 Total Depreciation of equipment 10186 Amortization Expense 1120 Patent 1120 Salaries and Wages Expense 2140 Salaries and Wages Payable 2140 Notes Payable (due April 30, 2015) 12100 Notes Payable (due in 2020) 35640 Total 47740 Interest p.a 4774 Interest Payable 4774 Interest Expense 4774 Tax expenses 12480 Tax Payable 12480 Unadjusted Trial Balance on 1st Dec 14 Journal and Adjustment entries Adjusted Trial Balance on 31st Dec 14 Debit Credit Debit Credit Debit Credit Cash 25,860 8850 21950 12,760 Accounts Receivable 36,060 3890 32,170 Notes Receivable 9,600 9,600 0 Interest Receivable 576 576 0 Inventory 36,060 3420 32,640 Prepaid Insurance 3,750 2500 1,250 Land 21,100 21,100 0 Buildings 1,56,000 1,56,000 0 Equipment 60,600 15600 5200 71,000 Patent 10,080 1120 8,960 Allowance for Doubtful Accounts 480 0 480 Accumulated Depreciation—Buildings 52,000 4120 0 56120 Accumulated Depreciation—Equipment 24,240 1950 10186 32476 Accounts Payable 28,300 0 28300 Tax Payables 12480 0 12480 Salaries and Wages Payable 2140 0 2140 Notes Payable (due April 30, 2015) 12,100 0 12100 Interest Payable 0 0 Notes Payable (due in 2020) 35,640 0 35640 Common Stock 56,500 0 56500 Retained Earnings 46,280 0 46280 Dividends 14,400 14,400 0 Sales Revenue 9,13,000 5290 0 918290 Interest Revenue 576 0 576 Gain on Disposal of Plant Assets 760 0 760 Bad Debt Expense 3890 3,890 0 Cost of Goods Sold 6,32,100 3420 6,35,520 0 Depreciation Expense 14756 14,756 0 Insurance Expense 2500 2,500 0 Interest Expense 0 0 0 Other Operating Expenses 61,030 61,030 0 Amortization Expense 1120 1,120 0 Tax Expense 12480 12,480 0 Salaries and Wages Expense 1,01,900 8490 1,10,390 0 Total 11,68,540 11,68,540 73,632 73,632 12,02,142 12,02,142 Retained Earnings Statement Op Retained Earnings balance 46,280 Profit & Loss A/c for the year Sales Revenue 918290 Interest Revenue 576 Gain on Disposal of Plant Assets 760 Bad Debt Expense 3,890 Cost of Goods Sold 6,35,520 Depreciation Expense 14,756 Insurance Expense 2,500 Interest Expense 0 Other Operating Expenses 61,030 Amortization Expense 1,120 Tax Expense 12,480 Salaries and Wages Expense 1,10,390 841686 919626 Profit after Tax 77940 77940 Dividend -14,400 Cl Retained Earnings as on 31st Dec 14 1,09,820 Balance sheet ason 31st Dec 14 Assets Current Assets Cash 12,760 Accounts Receivable 32,170 Notes Receivable 9,600 Interest Receivable 576 Inventory 32,640 Prepaid Insurance 1,250 Total Current Assets 88,996 Current Liabilities Tax Payables 12,480 Salaries and Wages Payable 2,140 Notes Payable (due April 30, 2015) 12,100 Interest Payable 0 Allowance for Doubtful Accounts 480 Accounts Payable 28,300 Total Current Liab -55,500 Net Current Assets 33,496 Fixed Assets Land 21,100 0 Buildings 1,56,000 0 Equipment 71,000 0 Patent 8,960 0 Accumulated Depreciation—Buildings 0 56,120 Accumulated Depreciation—Equipment 0 32,476 Net Fixed Assets 1,68,464 Total Assets 2,01,960 Common Stock 56500 Retained Earnings 1,09,820 Shareholders Funds 166320 Long term loans Notes Payable (due in 2020) 35,640 Total Liabilites 201960

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