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Bus Adm-201 Fall 2013 EXTRA CREDIT TWO Due in DS week of November 18

GRADING: Worth 15 points. Partially completed problems will not be accepted. If you complete all items requested, you will earn at least 5 points. The remaining points are dependent on accuracy of your answers!

Green Bay Konkers Corporation prepares quarterly financial statements. The balance sheet at 12/31/13 is presented below.

		Balance Sheet
		12/31/2013
Cash	$ 26,500		Accounts payable	$ 36,200
Accounts receivable	22,300		Common stock	130,000
Allowance for doubtful accounts	(2,000)		Retained earnings	50,600
Equipment	35,000
Accumulated depreciation - equipment	(25,000)
Land	40,000
Building	160,000
Accumulated depreciation - building	(40,000)
	$ 216,800			$216,800

During the first quarter of 2014, the following transactions occurred:

1. Green Bay Konkers performed services during the first quarter for $162,000 on account.

2. On 2/1/14, Green Bay Konkers collected fees of $18,000 in advance for $1,500 of services to be performed each month from 2/1/14 to 1/30/15.

3. On 2/1/14, Green Bay Konkers purchased computer equipment for $15,000 plus sales taxes of $750. $5,000 cash was paid with the rest on account. Check #455 was used.

4. Green Bay Konkers collected $151,000 on 3/5/14 from customers on account.

5. Green Bay Konkers paid $42,300 on accounts payable. Check #456 was used.

6. Paid other operating expenses of $105,230. Check #457 was used.

7. Acquired a patent with a 10-year life for $12,000 cash on 3/1/14. Check #458 was used.

8. Wrote off a customer receivable of $500 who went bankrupt.

9. On 3/31/14, Green Bay Konkers sold for $2,780 cash equipment which originally cost $16,000. It had an estimated life of 5 years and salvage of $1,000. Accumulated depreciation as of 12/31/13 was $13,500 using the straight line method. Record depreciation on the equipment sold, then record the sale.

10. AJE 3/31/14: Record revenue earned from item 2 above.

11. AJE 3/31/14: $27,800 of accounts receivable at 3/31/14 are not due yet. The bad debt percentage for these is 5%. The balance of A/R are past due. The bad debt percentage for these is 48.5%. Record bad debt expense.

HINT: You will need to compute the balance in accounts receivable and the unadjusted allowance for doubtful accounts before calculating this.

12. AJE 3/31/14: Depreciation is recorded on the equipment still owned at 3/31/14. The new equipment purchased in February is being depreciated on a double declining basis over 5 years and salvage value was estimated at $2,000. The old equipment still owned is being depreciated over a 10 year life using straight line with no salvage value.

13. AJE 3/31/14: Depreciation is recorded on the building on a straight-line basis based on a 30-year life and a salvage value of $10,000.

14. AJE 3/31/14: Amortization is recorded on the patent.

15. The company reconciles its bank statement every quarter. Information from the 12/31/13 Bank Reconciliation is:

Deposit in transit: 12/30/08 $1,000

Outstanding Checks #440 2,345

#452 2,030

#453 890

#454 6,555

The Bank statement received for the quarter ended 3/31/14 is as follows:

Beginning balance per bank $ 37,320

Deposits: 1/2/14 $1,000, 2/2/14 $18,000, 3/6/14 $151,000 170,000

Checks: #452 $2,030, #453 $890, #456 $42,300, #457 $105,230 (150,450)

Debit memo: Bank service charge (Record as operating expense) ( 75)

Ending bank balance $ 56,795

16. AJE: The income tax rate is 30%. This amount will be paid when the tax return is due in April. Hint: Prepare the income statement up to income before taxes and multiply by 30% to compute the amount.

REQUIRED: Print out the solution pages for the general ledger, journal and worksheet that follow and enter the following transactions. I suggest that you use a pencil.

a. Enter the transactions 1-9 in the general journal provided on the following pages.

b. Enter the 12/31/13 balances in ledger accounts. Use the ledger account running balance format accounts 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 above and the data for adjusting entries, prepare a 10 column worksheet similar to the one in the chapter 4 appendix of your text.

e. Prepare a bank reconciliation in good form. (Item 15 above.) Use your own paper. Record the necessary AJE.

f. Journalize and post all other adjusting entries. (Items 10 - 16)

g. Prepare an income statement and a retained earnings statement for the quarter ended 3/31/14 and a classified balance sheet at 3/31/14. Use your own paper. (No formatted sheets are supplied as we did for the other items.)

EXTRA CREDIT TWO SOLUTION – Name ________________________

DS ____________

Part a, e and f

Extra Credit 2 – 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.

Part b, c and d

	General Ledger
b.	CASH	DR	CR	BALANCE
	Beginning
	item 2
	item 3
	item 4
	item 5
	item 6
	item 7
	item 9
	Item 15

b.	ACCOUNTS RECEIVABLE	DR	CR	BALANCE
	Beginning
	item 1
	item 4
	item 8

b.	ALLOW FOR DOUBTFUL ACCTS	DR	CR	BALANCE
	Beginning
	item 8
	item 11

b.	EQUIPMENT	DR	CR	BALANCE
	Beginning
	Item 3
	Item 9

b.	ACCUM DEPR EQUIPMENT	DR	CR	BALANCE
	Beginning
	item 9
	item 9
	Item 12

b.	LAND	DR	CR	BALANCE
	Beginning

b.	BUILDING	DR	CR	BALANCE
	Beginning

b.	ACCUM DEPR BUILDING	DR	CR	BALANCE
	Beginning
	item 13

b.	PATENTS	DR	CR	BALANCE
	item 7
	item 14

b.	ACCOUNTS PAYABLE	DR	CR	BALANCE
	Beginning
	item 3
	item 5

b.	UNEARNED REVENUE	DR	CR	BALANCE
	item 2
	item 10

b.	INCOME TAXES PAYABLE	DR	CR	BALANCE
	item 16

b.	COMMON STOCK	DR	CR	BALANCE
	Beginning

b.	RETAINED EARNINGS	DR	CR	BALANCE
	Beginning

b.	SERVICE REVENUE	DR	CR	BALANCE
	item 1
	item 10

b.	OPERATING EXPENSES	DR	CR	BALANCE
	item 6
	Item 15

b.	DEPRECIATION EXPENSE	DR	CR	BALANCE
	item 9
	item 12
	item 13

b.	AMORTIZATION EXPENSE	DR	CR	BALANCE
	item 14

b.	GAIN ON DISPOSAL	DR	CR	BALANCE
	item 9

b.	BAD DEBT EXPENSE	DR	CR	BALANCE
	item 11

b.	INCOME TAX EXPENSE	DR	CR	BALANCE
	item 16

Worksheet (d)