Comprehensive Problem 3 Part 1: Selected transactions completed by Kornett Company during its first fiscal year ended Dec. 31, 2048, were as follows: 1. Journalize the selected transactions. Assume 360 days per year. If no entry is required, select "No entry required" from the dropdown and leave the amount boxes blank. For a compound transaction, if an amount box does not require an entry, leave it blank. Jan. 3: Issued a check to establish a petty cash fund of $4,500. Description Debit Credit Petty Cash 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. Description Debit Credit Apr. 14: Purchased $31,300 of merchandise on account, terms, n/30. The perpetual inventory system is used to account for inventory. Descrintion Dehit Credit Apr. 14: Purchased $31,300 of merchandise on account, terms, n/30. The perpetual inventory system is used to account for inventory. Description Debit Credit May 13: Paid the invoice of Apr. 14. Description Debit Credit May 17: Received cash from daily cash sales for $21,200. The amount indicated by the cash register was $21,240. Description Debit Credit June 2: Received a 60-day, 8% note for $180,000 on the Ryanair account. Description Debit Credit Aug. 1: Received amount owed on June 2 note plus interest at the maturity date. Description Debit Credit Aug. 24: Received $7,600 on the Finley account and wrote off the remainder owed on a $9,000 accounts receivable balance. (The allowance method is used in accounting for uncollectible receivables.) Description Debit Credit Sept. 15: Reinstated the Finley account written off on Aug. 24 and received $1,400 cash in full payment. Description Debit Credit Sept. 15: Purchased land by issuing a $670,000, 90-day note to Zahorik Co., which discounted it at 9%. Description Debit Credit Oct. 17: Sold office equipment in exchange for $135,000 cash plus receipt of a $100,000, 90-day, 9% note. The equipment had a cost of $320,000 and accumulated depreciation of $64,000 as of Oct. 17. Description Debit Credit Nov. 30: Journalized the monthly payroll for November, based on the following data: Salaries Deductions Sales salaries $135,000 Income tax withheld $39,266 Office salaries 77,250 Social security tax withheld 12,735 $212,250 Medicare tax withheld 3,184 Unemployment tax rates: Unemployment tax rates: State unemployment 5.4% Federal unemployment 0.6% Amount subject to unemployment taxes: State unemployment $5,000 Federal unemployment 5,000 Nov. 30: Journalized the employer's payroll taxes on the payroll. Description Debit Credit Description Debit Credit Description Debit Credit Dec. 14: Journalized the payment of the Sept. 15 note at maturity. Description Debit Credit Dec. 31: The pension cost for the year was $190,400, of which $139,700 was paid to the pension plan trustee. Description Debit Credit eBook Print Item Comprehensive Problem 3 Comprehensive Problem 3 Part 2: The following is a comprehensive problem which encompasses all of the elements learned in previous chapters. You can refer to the objectives for each chapter covered as a review of the concepts. Note: You must complete part 1 before completing part 2. Based on the following data, prepare a bank reconciliation for December of the current year: a. Balance according to the bank statement at December 31, $283,000. b. Balance according to the ledger at December 31, $245,410. c. Checks outstanding at December 31, $68,540. d. Deposit in transit, not recorded by bank, $29,500. e. Bank debit memo for service charges, $750. f. A check for $12,700 in payment of an invoice was incorrectly recorded in the accounts as $12,000. Kornett Company Bank Reconciliation December 31, 2018 Adjusted balance Deduct: Adjusted balance Comprehensive Problem 3 Part 3: Note: You must complete parts 1 and 2 before completing part 3 of this comprehensive problem. Based on the bank reconciliation prepared in (2), journalize the entry or entries to be made by Kornett Company. If an amount box does not require an entry, leave it blank. Description Debit Credit Comprehensive Problem 3 Part 4: Note: You must complete parts 1, 2, and 3 before completing part 4 of this comprehensive problem. Based on the following selected data, journalize the adjusting entries as of December 31 of the current year. For a compound transaction, if an amount box does not require an entry, leave it blank. If no entry is required, select "No entry required" from the dropdown and leave the amount boxes blank. a. Estimated uncollectible accounts at December 31, $16,000, based on an aging of accounts receivable. The balance of Allowance for Doubtful Accounts at December 31 was $2,000 (debit). Description Debit Credit b. The physical inventory on December 31 indicated an inventory shrinkage of $3,300. Description Debit Credit c. Prepaid insurance expired during the year, $22,820. Description Debit Credit c. Prepaid insurance expired during the year, $22,820. Description Debit Credit d. Office supplies used during the year, $3,920. Description Debit Credit e. Depreciation is computed as follows: Residual Acquisition Useful Life Depreciation Asset Cost Value Date in Years Method Used Buildings $900,000 $0 January 2 50 Double-declining-balance Office Equip. 246,000 26,000 January 3 5 Straight-line Store Equip. 112,000 12,000 July 1 10 Straight-line Description Debit Credit Store Equip. 112,000 12,000 July 1 10 Straight-line Description Debit Credit f. A patent costing $48,000 when acquired on January 2 has a remaining legal life of 10 years and is expected to have value for eight years. Description Debit Credit g. The cost of mineral rights was $546,000. Of the estimated deposit of 910,000 tons of ore, 50,000 tons were mined and sold during the year. Description Debit Credit Description Debit Credit h. Vacation pay expense for December, $10,500. Description Debit Credit i. A product warranty was granted beginning December 1 and covering a one-year period. The estimated cost is 4% of sales, which totaled $1,900,000 in December. Description Debit Credit j. Interest was accrued on the note receivable received on October 17. Assume 360 days per year. Description Debit Credit Comprehensive Problem 3 Part 5: Note: You must complete parts 1, 2, 3, and 4 of this comprehensive problem before completing part 5. Based on the following information and the post-closing trial balance shown below, prepare a balance sheet in report form at December 31 of the current year. The merchandise inventory is stated at cost by the LIFO method. The product warranty payable is a current liability. Vacation pay payable: Current liability $7,140 Long-term liability 3,360 The unfunded pension liability is a long-term liability. Notes payable: Current liability $70,000 Long-term liability 630,000 Kornett Company Post-Closing Trial Balance December 31, 2018 Debit Credit Balances Balances Petty Cash 4,500 Cash 243,960 Notes Receivable 100,000 Accounts Receivable 470,000 Allowance for Doubtful Accounts 16,000 Merchandise Inventory 320,000 Interest Receivable 1,875 Prepaid Insurance 45,640 Office Supplies 13,390 Land 654,925 900,000 Buildings Accumulated Depreciation-Buildings 36,000 Office Equipment 246,000 Accumulated Depreciation-Office Equipment 44,000 Store Equipment 112,000 Accumulated Depreciation-Store Equipment 5,000 Mineral Rights 546,000 Accumulated Depletion 30,000 Patents 42,000 Social Security Tax Payable 25,470 Medicare Tax Payable 4,710 Employees Federal Income Tax Payable 40,000 State Unemployment Tax Payable 270 Federal Unemployment Tax Payable 30 Salaries Payable 157,000 Accounts Payable 131,600 Interest Payable 28,000 Product Warranty Payable 76,000 Vacation Pay Payable 10,500 Unfunded Pension Liability 50,700 Notes Payable 700,000 J. Kornett, Capital 2,345,010 3,700,290 3,700,290 Enter all amounts as positive numbers. Kornett Company Balance Sheet December 31, 2018 Assets Current assets: Total current assets Property, plant and equipment: Total property, plant and equipment Intangible assets: Total assets Liabilities Current liabilities: Total current liabilities Total current liabilities Long-term liabilities: $ Total long-term liabilities Total liabilities Owner's Equity Total liabilities and owner's equity