During the first quarter of 2017, the following transactions occurred On Februar

Question

During the first quarter of 2017, the following transactions occurred On February 1, Novak collected fees of $7,200 in advance. The company will perform $600 of services each month from February 1, 2017, to January 31, 2018 On February 1, Novak purchased computer equipment for $11,250 plus sales taxes of $750, $3,750 cash was paid with the rest on account. Check #455 was used On March 1, Novak acquired a patent with a 10-year life for $12,000 cash. Check #456 was used On March 28, Novak recorded the quarter's sales in a single entry. During this period, Novak had total sales of $170,000 (not including the sales referred to in item 1 above). All of the sales were on account. On March 29, Novak collected $163,000 from customers on account. on March 29, Novak paid $16,390 on accounts payable. Check #457 was used on March 29, Novak paid other operating expenses of $97,500. Check #458 was used On March 31, Novak wrote off a receivable of $300 for a customer who declared bankruptcy On March 31, Novak sold for $1,620 equipment that originally cost $11,000. It had an estimated life of 5 years and salvage of $1,000. Accumulated depreciation as of December 31, 2016, was $8,000 using the straight line method. (Hint: Record depreciation on the equipment sold, then record the sale.) 1. 3. 4. 5. 6, 8. 9.

Explanation / Answer

DATE, 2017

DETAILS

AMOUNT $

DEBIT A/C

CREDIT A/C

1

FEB 1

FEES COLLECTED IN ADVANCE

7200

CASH

FEES IN ADVANCE

TRANSFER OF FEES FOR YEAR

$600 X 2 MTHS

1200

FEES IN ADVANCE

INCOME STATEMENT

2

FEB 1

PURCHASED EQUIPMENT ON ACCOUNT #455

11250

EQUIPMENT

750

SALES TAX

12000

ACC PAY EQUIPMENT

FEB 1

PAID SUPPLIER OF EQUIPMENT #455

3750

ACC PAY SUPPLIER

CASH

3

MAR 1

PAID FOR PATENT #456

12000

PATENTS

CASH

4

MAR 28

SALES ON ACCOUNT

170000

ACC REC

SALES

5

MAR 29

COLLECTED FROM DEBTORS

163000

CASH

ACC REC

6

MAR 29

PAYMENTS TO SUPPLIERS #457

16390

ACC PAY

CASH

7

MAR 29

PAID FOR OPERATING EXPENSES #458

97500

OP EXP

CASH

8

MAR 31

WROTE OFF BAD DEBTS

300

BAD DEBTS

ACC REC

9

MAR 31

DISPOSAL OF EQUIPMENT FOR $1620 AFTER RECORDING DEP FOR THE YEAR

11000

DISPOSAL

EQUIPMENT

*TRANF OF ACC DEP

10000

ACC DEP

DISPOSAL

1620

CASH

DISPOSAL

620

DISPOSAL

INCOME STATEMENT

10

MAR 31

AMORTIZATION OF PATENT

100

AMORT

ACC AMOR PATENT

11

MAR 31

BANK CHARGES AS PER BANK STATEMENT

100

BANK CHGS

BANK

12

MAR 31

**ASSUMING THE BALANCE AFTER 170,000 – 163000 ARE ALL PAST DUE DATE THE AFTER BAD DEBT WRITE OFF = $6700 X 24% = 1608

1608

BAD DEBTS

PROV FOR BAD DEBTS

*

DEPN ON ‘OLD EQUIPMENT’ ? NO VALUES GIVEN ……

*

DEPN ON BUILDING ? NO VALUES GIVEN………

INCOME TAX ? NO INCOME STATEMENT PREPARED ?MISSING INFO ?

DATE, 2017

DETAILS

AMOUNT $

DEBIT A/C

CREDIT A/C

1

FEB 1

FEES COLLECTED IN ADVANCE

7200

CASH

FEES IN ADVANCE

TRANSFER OF FEES FOR YEAR

$600 X 2 MTHS

1200

FEES IN ADVANCE

INCOME STATEMENT

2

FEB 1

PURCHASED EQUIPMENT ON ACCOUNT #455

11250

EQUIPMENT

750

SALES TAX

12000

ACC PAY EQUIPMENT

FEB 1

PAID SUPPLIER OF EQUIPMENT #455

3750

ACC PAY SUPPLIER

CASH

3

MAR 1

PAID FOR PATENT #456

12000

PATENTS

CASH

4

MAR 28

SALES ON ACCOUNT

170000

ACC REC

SALES

5

MAR 29

COLLECTED FROM DEBTORS

163000

CASH

ACC REC

6

MAR 29

PAYMENTS TO SUPPLIERS #457

16390

ACC PAY

CASH

7

MAR 29

PAID FOR OPERATING EXPENSES #458

97500

OP EXP

CASH

8

MAR 31

WROTE OFF BAD DEBTS

300

BAD DEBTS

ACC REC

9

MAR 31

DISPOSAL OF EQUIPMENT FOR $1620 AFTER RECORDING DEP FOR THE YEAR

• TRANSFR OF COST

11000

DISPOSAL

EQUIPMENT

*TRANF OF ACC DEP

10000

ACC DEP

DISPOSAL

• CASH RECEIVED

1620

CASH

DISPOSAL

• TRAFS OF PROFIT

620

DISPOSAL

INCOME STATEMENT

10

MAR 31

AMORTIZATION OF PATENT

100

AMORT

ACC AMOR PATENT

11

MAR 31

BANK CHARGES AS PER BANK STATEMENT

100

BANK CHGS

BANK

12

MAR 31

**ASSUMING THE BALANCE AFTER 170,000 – 163000 ARE ALL PAST DUE DATE THE AFTER BAD DEBT WRITE OFF = $6700 X 24% = 1608

1608

BAD DEBTS

PROV FOR BAD DEBTS

*

DEPN ON ‘OLD EQUIPMENT’ ? NO VALUES GIVEN ……

*

DEPN ON BUILDING ? NO VALUES GIVEN………

INCOME TAX ? NO INCOME STATEMENT PREPARED ?MISSING INFO ?

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