Cayuga Corporation prepares quarterly financial statements. The balance sheet at December 31, 2016, is presented below.

Cayuga Corporation
Balance Sheet
December 31, 2016
Assets			Liabilities and Stockholders' Equity
Cash	26,700		Accounts payable	17,270
Accounts receivable	21,000		Common stock	80,000
Allowance for doubtful accounts	(1,000)		Retained earnings	46,030
Land	25,000
Equipment	36,000
A/D - equipment	(24,400)
Building	75,000
A/D - building	(15,000)
	143,300			143,300

During the first quarter of 2017 the following transactions occurred:

1. Performed services for $170,000 on account.

2. On February 1, collected fees of $14,400 in advance. $1,200 worth of services are to be performed each month from February 1, 2017, to January 31, 2018. (Wait to make adjusting entries.)

3. On February 1, purchased equipment for $9,000 plus 5% sales tax. $3,000 cash was paid with the remaining balance on account. Check #755 was used.

4. On March 5, collected $153,000 on from customers on account.

5. Paid $14,270 on accounts payable. Check #756 was used.

6. Paid administrative expenses of $64,500. Check #757 was used.

7. Acquired a patent with a 10-year life for $6,600 cash on March 1. Check #758 was used.

8. Wrote off a receivable of $240 from a customer who went bankrupt.
9. On March 31, Cayuga Corp. sold for $2,900 cash equipment which originally cost $12,000. It had an estimated life of 8 years and a salvage of $4,000. Accumulated depreciation as of December 31, 2016, was $5,000 using the straight line method. (1) Record depreciation on the equipment sold, (2) record the sale.

Adjusting Journal Entries:

10. Record revenue earned from item 2 above.

11. On March 31, $27,000 of Accounts Receivable is not yet due. The bad debt percentage for these current receivables is 3%. The remaining balance in Accounts Receivable is past due. The bad debt percentage for these receivables is 20%. Record bad debt expense.

Hint: You will need to calculate the balance in accounts receivable before calculating bad debt expense. You should do this by looking at the ledger after posting entries 1-9.

12. Record depreciation on the equipment as of March 31. The new equipment purchased in February is being depreciated using the double declining balance method over 5 years. The equipment has an estimated salvage value of $1,000. The equipment that was on the books on December 31, 2016, and that is still owned by Cayuga is being depreciated over a 10-year life using straight line with no salvage value.

13. Depreciation is recorded on the building on a straight-line basis using a 30-year life and a salvage value of $15,000.

14. Amortization is recorded on the patent.

15. The company reconciles its bank statement every quarter. Information from the December 31, 2016, bank reconciliation is provided below. Make the necessary journal entry. You will need the facts in this item to complete the bank reconciliation for Requirement (e). There were no errors.

Deposit in transit 12/30/16 $4,000

Outstanding Checks #740 $3,444

#752 421

#753 899

#754 5,845

The bank statement received for the quarter ended March 31, 2017, was:

Beginning balance per bank $ 33,309

Deposits: 1/2/17 $4,000; 2/2/17 $14,400; 3/6/17 $153,000 171,400

Checks: #752 $421; #753 $899; #756 $14,270; #757 $64,500 ( 80,090)

Debit memo: Bank service charge (Record as Administrative expense.) ( 77)

Ending balance per bank $ 124,542

16. Cayugas income tax rate is 40%. The tax will be paid when the tax return is due in April.

Hint: Prepare the income statement up to income before taxes and multiply by 40% to compute the amount of income tax expense.

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

1. Enter the December 31, 2016, balances in ledger accounts. Use the ledger account running balance format accounts provided on the following pages. Look at the cash account for an example of how to use the running balance ledger. I have completed the first two lines of it for you. It is a good idea to keep track of whether your balance column is a debit or a credit, particularly for contra accounts.
2. Enter the transactions numbered 1-9 in the general journal provided on the following pages.
3. Post the journal entries to the ledger accounts for items 1-9.
4. Prepare an unadjusted trial balance at March 31and enter on the worksheet. Then complete the other worksheet columns. (See below.)

Worksheet requirement: Using your unadjusted trial balance (d) above and the data for adjusting entries, (e) and (f) below, prepare a 12 column worksheet similar to the Sierra Corporation Worksheet in the Chapter 4 folder on D2L. You will not receive any credit if the worksheet is incomplete.

5. Prepare a bank reconciliation in good form. (Item 15 above.) Use your own paper. Record the necessary AJE in the journal, the ledger, and the worksheet.
6. Journalize and post all other adjusting entries. (Items 10-16 above.) Add them to the worksheet.
7. 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. Appropriate name the gain/loss account on your income statement (you must call it either a gain or a loss, not both.) Use your own paper. (No formatted sheets are supplied as for the other items.)
8. Journalize closing entries. You are not required to post the closing entries or prepare a post-closing trial balance for this assignment.

EXTRA CREDIT II SOLUTION Name General Ledger continued Requirements (b), (e), and(0) BLANC cLTS ECEIVABLE Cradin LDNG Esi BALANCE BALANCE PECIATION- ec DE BALANCE oAsCE F0R DOUBTFUL ACCOUNTS DE PATENTS C3 BALANCE a. ANT C RAANCE Betieine NTSA14BLE DR CT DE BALANCE NEARNED SFRVICE REIENE C BALANCE M DEPRECIATON. FOUm Rerbei D1 NCOS TAXES TAVABLE ALANCE N STOCE E BALANCE 112 NINGS BALANCE RAr ANCE. SERVICE REVENUE ADIESTRATIE EXPENERS Ceeral Leder Regaine CP BA14NCE Bissin Worksheet (d), (e), (f) General Ledger - continued DEPRECIATION EXPENSE DR CE BALANCE AMORTIZATION EXPENSE CE BALANCE DE DR. GAINLOSS ON DISPOSAL CE BALANCE BALANCE BAD DEBT EXPENSE DE CK INCOME TAX EXPENSE DR CR BALANCE