Aberkonkie Corporation prepares quarterly financial statements. The post- closing trial balance at December 31, 2016, is presented below.

During the first quarter of 2017, the following transaction occurred:
1. On February 1, Aberkonkie collected fees of $12,000 in advance. The company will perform $1,000 of services each month from February 1, 2017, to January 31, 2018.
2. On February 1, Aberkonkie purchased computer equipment for $9,000 plus sales taxes of $600. $3,000 cash was paid with the rest on account. Check #455 was used.
3. On March 1, Aberkonkie acquired a patent with a 10-year life for $9,600 cash. Check #456 was used.
4. On March 28, Aberkonkie recorded the quarter's sales in a single entry. During this period, Aberkonkie had total sales of $140,000 (not including the sales referred to in item 1 above). All of the sales were on account.
5. On March 29, Aberkonkie collected $133,000 from customers on account.
6. On March 29, Aberkonkie paid $16,370 on accounts payable. Check #457 was used.
7. On March 29, Aberkonkie paid other operating expenses of $97,525. Check #458 was used.
8. On March 31, Aberkonkie wrote off a receivable of $200 for a customer who declared bankruptcy.
9. On March 31, Aberkonkie 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.
Bank reconciliation data and adjustment data:
1. The company reconciles its bank statement every quarter. Information from the December 31, 2016, bank reconciliation is:

The bank statement received for the quarter ended March 31, 2017, is as follows:
Beginning balance per bank.............................................................$29,787
Deposits: 1/2/2017, $5,000; 2/2/2017, $12,000; 3/30/2017, $133,000............150,000
Checks: #452, $333; #453, $865; #457, $16,370; #458, $97,525.................(115,093)
Debit memo: Bank service charge (record as operating expense)......................(100)
Ending bank balance......................................................................$64,594
2. Record revenue earned from item 1 above.
3. $26,000 of accounts receivable at March 31, 2017, are not past due yet. The bad debt percentage for these is 4%. The balance of accounts receivable are past due. The bad debt percentage for these is 23.75%. Record bad debt expense.
4. Depreciation is recorded on the equipment still owned at March 31, 2017. The new equipment purchased in February is being depreciated on a straight-line basis over 5 years and salvage value was estimated at $1,200. The old equipment still owned is being depreciated over a 10-year life using straight-line with no salvage value.
5. Depreciation is recorded on the building on a straight-line basis based on a 30-year life and a salvage value of $10,000.
6. Amortization is recorded on the patent.
7. The income tax rate is 30%. This amount will be paid when the tax return is due in April.
Instructions
(a) Record journal entries for transactions 1-9.
(b) Enter the December 31, 2016, balances in ledger accounts using T-accounts.
(c) Post the journal entries to the ledger accounts for items 1-9.
(d) Prepare an unadjusted trial balance at March 31.
(e) Prepare a bank reconciliation in good form.
(f) Journalize and post entries related to bank reconciliation and all adjusting entries.
(g) Prepare an adjusted trial balance.
(h) Prepare an income statement and a retained earnings statement for the quarter ended March 31, 2017, and a classified balance sheet at March 31, 2017.

Transcribed Image Text:

ABERKONKIE CORPORATION Post-Closing Trial Balance December 31, 2016 Debit Credit Cash Accounts Receivable Allowance for Doubtful Accounts Equipment Accumulated Depreciation-Equipment Buildings Accumulated Depreciation-Buildings Land Accounts Payable Common Stock Retained Earnings 24,300 22,400 20,000 100,000 20,000 $1,200 15,000 15,000 12,370 90,000 53,130 $186,700 $186,700 12/30/2016 #440 #452 #453 #454 Deposit in transit: Outstanding checks $5,000 3,444 865 5,845