Selected transactions completed by Kornett Company during its first fiscal year

Question

Selected transactions completed by Kornett Company during its first fiscal year ended December 31, 20Y5, were as follows: Jan. 3. Issued a check to establish a petty cash fund of $4,500. 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. Apr. 14. Purchased $31,300 of merchandise on account terms 1/10, n/30. The perpetual inventory system is used to account for inventory Paid the invoice of April 14 after the discount period had passed. Received cash from daily cash sales for $21,200. The amount indicated by the cash register was $21,240. May 13. 17. June 2. Received a 60-day, 8% note for $180,000 on the Ryanair account. Aug. . Received amount owed on June 2 note, plus interest at the maturity date Received $7,600 on the Finley account and wrote off the remainder owed on a $9,000 accounts receiv- able balance. (The allowance method is used in accounting for uncollectible receivables) 24. Sept. 15. Reinstatedthe Finley account written off on August 24 and received $1,400 cash in full payment 15. Purchased land by issuing a $670,000, day note to Zahorik Co, which discounted it at 996. 17. Sold office equipment in exchange for $135,000 cash plus receipt of a $100,000, 90-day, 996 note. The Oct. equipment had a cost of $320,000 and accumulated depredation of $64,000 as of October 17 Nov. 30. Journalized the monthly payroll for November, based on the following data: Sales salaries Office salaries $39,266 12,735 3,184 135,000 Income tax withheld 77,250 Social security tax withheld 212250Medicare tax withheld

Explanation / Answer

Solution:

1) Preparing the Journal Entries for the Selected Transactions:

2) Preparing the Bank Reconciliation for December of the Current Year:

KORNETT COMPANY

Bank Reconciliation

December 31, 20Y5

3) Preparing the Journal Entry to Record the Miscellaneous Expense Account:

4) Preparing the Adusting Entries as of the December 31 of the Current Year;

5) Preparing the Balance Sheet in Report Form at December 31 of the Current Year:

KORNETT COMPANY

Balance Sheet

December 31, 20Y5

Date General Journal Debit Credit Jan 3 Petty Cash $4,500 Cash $4,500 Feb 26 Office Supplies $1,680 Miscellaneous Selling Expense $570 Miscellaneous Administrative Expense $880 Cash $3,130 Apr 14 Merchandise Inventory $31,300 Accounts Payable $31,300 May 13 Accounts Payable $31,300 Cash $31,300 May 17 Cash $21,200 Cash Short and Over $40 Sales $21,240 June 2 Notes Receivable $180,000 Accounts Receivable - Ryanair $180,000 Aug 1 Cash $182,400 Notes Receivable $180,000 Interest Revenue $2,400 ($180,000 * 8% * 60/360 = $2,400) Aug 24 Cash $7,600 Allowance for Doubtful Accounts $1,400 Accounts Receivable - Finley $9,000 Sept 15 Accounts Receivable - Finley $1,400 Allowance for Doubtful Accounts $1,400 Cash $1,400 Accounts Receivable - Finley $1,400 Sept 15 Land $654,925 Interest Expense $15,075 Notes Payable $670,000 ($670,000 * 90/360 * 9%) Oct 17 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 Nov 30 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 Nov 30 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%) Dec 14 Notes Payable $670,000 Cash $670,000 Dec 31 Pension Expense $190,400 Cash $139,700 Unfunded Pension Liability $50,700 (Pension cost of $190,400 funded at $139,700)

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