Jamukha Corporation prepares annual financial statements. The balance sheet at December 31, 2017, is presented below. Jamukha Corporation Balance Sheet December 31, 2017 Assets Cash Accounts receivable Allowance for doubtful accounts Inventory Prepaid insurance Equipment A/D- Equipment Liabilities and Stockholders' Equity Accounts payable Common stock ($1 par) Paid-in capital in excess of par - Common stock Retained earnings 66,750 10,000 190,000 134,115 18,250 39,175 (3,000) 84,000 7,440 375,000 (120,000) 400,865 400,865 During 2018 the following transactions occurred: 1. Purchased $111,500 inventory on account. Jamukha Corp. uses a perpetual inventory system. 2. Sales of $225,000, plus 5.6% sales tax, were made to customers on account. Cost of goods sold was $125,000. The company uses a perpetual inventory system. 3. Received $45,000 cash down payment for orders that will be shipped next year. Issued 10 year, $75,000 face value, 4% bonds on July 1 at 102. The bonds were sold to yield an effective annual rate of 3.758218%, and they pay interest every January 1 and July 1. 5. Collected $180,500 on account. 6. Paid general expenses of $70,250. Assume these were paid as incurred (debit expenses). Paid $130,000 for amount due to supplier. Paid the sales tax collected from customers to the State of Wisconsin. On January 1, Jamukha Corp. sold for $106,000 cash equipment which originally cost $200,000. Accumulated depreciation for this equipment as of December 31, 2017, was $75,000. This transaction is exempt from sales tax. 10. Issued 1,250 shares of $100 par, 7% preferred stock for $200,000 cash. 11. Purchased equipment on July 1, 2018, for $225,000 cash. 12. Purchased 800 shares of Jamukha Corp. common stock from a disgruntled shareholder for $44 per share. 13. Recorded salaries and payroll taxes. Employee's gross salaries were $90,000. FICA tax was withheld at a rate of 7.65%. Federal income taxes (FIT) of $7,000 were withheld, and state income taxes (SIT) of $4,500 were withheld. The federal unemployment tax (FUTA) rate was 1%, and the state unemployment tax (SUTA) rate was 3.25%. No cash has been paid yet, so record all the amounts due in the appropriate payable accounts. 14. The paychecks and payroll taxes from entry #13 were paid. Adjusting Journal Entries: 15. Straight-line depreciation with an 14 year useful life and no salvage value is used for equipment purchased in previous years. The equipment purchased on July 1, 2018 (#11) is depreciated using double-declining balance with a useful life of 25 years and a $30,000 salvage value. (Hint: The equipment was purchased midway through the year.) 16. Accrue bond interest payable and amortize bond discount/premium. Jamukha Corp. uses effective-interest amortization. (Hint: The bond was issued midway through the year.) 17. The prepaid insurance relates to a policy purchased on December 31, 2017. This insurance expires at a rate of $225 per month. Record as a general expense. 18. Jamukha estimates that 5.5% of accounts receivable are uncollectible. 19. Jamukha Corp. is an S-corporation and is not subject to income tax. 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. a. Enter the transactions numbered 1-14 in the general journal provided on the following pages. b. Post the journal entries to the ledger accounts for items 1-14. 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. c. Prepare an unadjusted trial balance at December 31, 2018 and enter on the worksheet. d. Worksheet requirement: Using your unadjusted trial balance (c) above and the data for adjusting entries (#15-19), prepare a 12-column worksheet similar to the worksheet for Sierra Corporation in Chapter 4 and the prior extra credit assignments. You will not receive any credit if the worksheet is incomplete. To save time, you are not required to formally journalize or post your adjusting entries (you can just enter them on the worksheet). You are not required to record closing entries. e. Prepare a formal statement of cash flows using the T-account approach. Templates for the statement and the T-account worksheet are attached. (You are not required to formally present the other statements- just complete them on the worksheet.) Name EXTRA CREDIT III SOLUTION Journal: Requirement (a) General Journal Debit Credit a. 9. General Ledger: Requirement (b) DR CR CASH Beginning Item 3 18.250 45,000 BALANCE 18,250 DR 63,250 DR ACCOUNTS RECEIVABLE Beginning DR 39.175 BALANCE 39,175 DR DR ALLOWANCE FOR DOUBTFUL ACCOUNTS Beginning BALANCE 3,000 CR 3,000 DR INVENTORY Beginning BALANCE 84,000 DR 84.000 CR PREPAID INSURANCE Beginning DR.440 BALANCE 7,440 DR 7.440 CR EQUIPMENT Beginning DR 375,000 BALANCE 375,000 DR DR ACCUM DEPRECIATION - EQUIPMENT Beginning CR 120,000 BALANCE 120,000 CR General Ledger: Requirement (b) continued ACCOUNTS PAYABLE Beginning CR 66.750 BALANCE 66.750 CR SALARIES PAYABLE DR CR BALANCE SALES TAX PAYABLE DR CR BALANCE FICA PAYABLE DR CR BALANCE FIT PAYABLE CR BALANCE SIT PAYABLE DR CR BALANCE FUTA PAYABLE DR CR BALANCE SUTA PAYABLE CR BALANCE UNEARNED REVENUE BALANCE BONDS PAYABLE BALANCE PREMIUM ON BONDS PAYABLE CR BALANCE General Ledger: Requirement (b) continued DR COMMON STOCK ($1 PAR) Beginning CR 10,000 BALANCE 10,000 CR PREFERRED STOCK ($100 PAR) - DR DR CR BALANCE BALANCE PAID-IN CAPITAL IN EXCESS OF PAR- COMMON STOCK Beginning DR CR 190,000 BALANCE 190,000 CR PAID-IN CAPITAL IN EXCESS OF PAR- PREFERRED STOCK DR CR BALANCE TREASURY STOCK DR CR BALANCE RETAINED EARNINGS Beginning CR 134,115 BALANCE 134.115 CR SALES REVENUE DR CR BALANCE COST OF GOODS SOLD BALANCE GENERAL EXPENSES MR DR CR BALANCE SALARIES EXPENSE DR BALANCE PAYROLL TAX EXPENSE BALANCE LOSS ON DISPOSAL DR CR BALANCE Jamukha Corporation Worksheet: Requirement (c), (d) For the Year Ended December 31, 2018 Adjusted Income Retained Balance Adjustments Trial Balance Statement Earnings Statemer Sheet DR CR DR CR DR CRDR CRDR CR Unadjusted Trial Balance DR CR Account Title Totals Net loss Totals Ending retained earnings Totals Jamukha Corporation Statement of Cash Flows: Requirement (e) For the Year Ended December 31, 2018 CASH FROM OPERATING ACTIVITIES: Increases Decreases Net Cash From Operating Activities CASH FROM INVESTNG ACTIVITIES: Net Cash From Investing Activities CASH FROM FINANCING ACTIVITIES: Net Cash From Financing Activities NET INCREASE IN CASH Cash at beginning of year Cash at end of year Statement of Cash Flows T-Account Worksheet Requirement (e) A/D - Equipment 120,000 Common stock (S1 par) 10,000 Use the formal statement to show activity within the cash account. On this statement, debits to cash correspond to increases and credits correspond to decreases. Pref. stock ($100 par) Accounts receivable 39,175 Accounts payable 66,750 Interest payable Allow. for doubtful acct: 3,000 PICEP - CS 190,000 HHHHHH Unearned revenue PICEP - PS Inventory 84,000 Bonds payable Prepaid insurance 7,440 Retained earnings 134,115 Premium on B/P Treasury stock Equipment 375,000 Jamukha Corporation prepares annual financial statements. The balance sheet at December 31, 2017, is presented below. Jamukha Corporation Balance Sheet December 31, 2017 Assets Cash Accounts receivable Allowance for doubtful accounts Inventory Prepaid insurance Equipment A/D- Equipment Liabilities and Stockholders' Equity Accounts payable Common stock ($1 par) Paid-in capital in excess of par - Common stock Retained earnings 66,750 10,000 190,000 134,115 18,250 39,175 (3,000) 84,000 7,440 375,000 (120,000) 400,865 400,865 During 2018 the following transactions occurred: 1. Purchased $111,500 inventory on account. Jamukha Corp. uses a perpetual inventory system. 2. Sales of $225,000, plus 5.6% sales tax, were made to customers on account. Cost of goods sold was $125,000. The company uses a perpetual inventory system. 3. Received $45,000 cash down payment for orders that will be shipped next year. Issued 10 year, $75,000 face value, 4% bonds on July 1 at 102. The bonds were sold to yield an effective annual rate of 3.758218%, and they pay interest every January 1 and July 1. 5. Collected $180,500 on account. 6. Paid general expenses of $70,250. Assume these were paid as incurred (debit expenses). Paid $130,000 for amount due to supplier. Paid the sales tax collected from customers to the State of Wisconsin. On January 1, Jamukha Corp. sold for $106,000 cash equipment which originally cost $200,000. Accumulated depreciation for this equipment as of December 31, 2017, was $75,000. This transaction is exempt from sales tax. 10. Issued 1,250 shares of $100 par, 7% preferred stock for $200,000 cash. 11. Purchased equipment on July 1, 2018, for $225,000 cash. 12. Purchased 800 shares of Jamukha Corp. common stock from a disgruntled shareholder for $44 per share. 13. Recorded salaries and payroll taxes. Employee's gross salaries were $90,000. FICA tax was withheld at a rate of 7.65%. Federal income taxes (FIT) of $7,000 were withheld, and state income taxes (SIT) of $4,500 were withheld. The federal unemployment tax (FUTA) rate was 1%, and the state unemployment tax (SUTA) rate was 3.25%. No cash has been paid yet, so record all the amounts due in the appropriate payable accounts. 14. The paychecks and payroll taxes from entry #13 were paid. Adjusting Journal Entries: 15. Straight-line depreciation with an 14 year useful life and no salvage value is used for equipment purchased in previous years. The equipment purchased on July 1, 2018 (#11) is depreciated using double-declining balance with a useful life of 25 years and a $30,000 salvage value. (Hint: The equipment was purchased midway through the year.) 16. Accrue bond interest payable and amortize bond discount/premium. Jamukha Corp. uses effective-interest amortization. (Hint: The bond was issued midway through the year.) 17. The prepaid insurance relates to a policy purchased on December 31, 2017. This insurance expires at a rate of $225 per month. Record as a general expense. 18. Jamukha estimates that 5.5% of accounts receivable are uncollectible. 19. Jamukha Corp. is an S-corporation and is not subject to income tax. 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. a. Enter the transactions numbered 1-14 in the general journal provided on the following pages. b. Post the journal entries to the ledger accounts for items 1-14. 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. c. Prepare an unadjusted trial balance at December 31, 2018 and enter on the worksheet. d. Worksheet requirement: Using your unadjusted trial balance (c) above and the data for adjusting entries (#15-19), prepare a 12-column worksheet similar to the worksheet for Sierra Corporation in Chapter 4 and the prior extra credit assignments. You will not receive any credit if the worksheet is incomplete. To save time, you are not required to formally journalize or post your adjusting entries (you can just enter them on the worksheet). You are not required to record closing entries. e. Prepare a formal statement of cash flows using the T-account approach. Templates for the statement and the T-account worksheet are attached. (You are not required to formally present the other statements- just complete them on the worksheet.) Name EXTRA CREDIT III SOLUTION Journal: Requirement (a) General Journal Debit Credit a. 9. General Ledger: Requirement (b) DR CR CASH Beginning Item 3 18.250 45,000 BALANCE 18,250 DR 63,250 DR ACCOUNTS RECEIVABLE Beginning DR 39.175 BALANCE 39,175 DR DR ALLOWANCE FOR DOUBTFUL ACCOUNTS Beginning BALANCE 3,000 CR 3,000 DR INVENTORY Beginning BALANCE 84,000 DR 84.000 CR PREPAID INSURANCE Beginning DR.440 BALANCE 7,440 DR 7.440 CR EQUIPMENT Beginning DR 375,000 BALANCE 375,000 DR DR ACCUM DEPRECIATION - EQUIPMENT Beginning CR 120,000 BALANCE 120,000 CR General Ledger: Requirement (b) continued ACCOUNTS PAYABLE Beginning CR 66.750 BALANCE 66.750 CR SALARIES PAYABLE DR CR BALANCE SALES TAX PAYABLE DR CR BALANCE FICA PAYABLE DR CR BALANCE FIT PAYABLE CR BALANCE SIT PAYABLE DR CR BALANCE FUTA PAYABLE DR CR BALANCE SUTA PAYABLE CR BALANCE UNEARNED REVENUE BALANCE BONDS PAYABLE BALANCE PREMIUM ON BONDS PAYABLE CR BALANCE General Ledger: Requirement (b) continued DR COMMON STOCK ($1 PAR) Beginning CR 10,000 BALANCE 10,000 CR PREFERRED STOCK ($100 PAR) - DR DR CR BALANCE BALANCE PAID-IN CAPITAL IN EXCESS OF PAR- COMMON STOCK Beginning DR CR 190,000 BALANCE 190,000 CR PAID-IN CAPITAL IN EXCESS OF PAR- PREFERRED STOCK DR CR BALANCE TREASURY STOCK DR CR BALANCE RETAINED EARNINGS Beginning CR 134,115 BALANCE 134.115 CR SALES REVENUE DR CR BALANCE COST OF GOODS SOLD BALANCE GENERAL EXPENSES MR DR CR BALANCE SALARIES EXPENSE DR BALANCE PAYROLL TAX EXPENSE BALANCE LOSS ON DISPOSAL DR CR BALANCE Jamukha Corporation Worksheet: Requirement (c), (d) For the Year Ended December 31, 2018 Adjusted Income Retained Balance Adjustments Trial Balance Statement Earnings Statemer Sheet DR CR DR CR DR CRDR CRDR CR Unadjusted Trial Balance DR CR Account Title Totals Net loss Totals Ending retained earnings Totals Jamukha Corporation Statement of Cash Flows: Requirement (e) For the Year Ended December 31, 2018 CASH FROM OPERATING ACTIVITIES: Increases Decreases Net Cash From Operating Activities CASH FROM INVESTNG ACTIVITIES: Net Cash From Investing Activities CASH FROM FINANCING ACTIVITIES: Net Cash From Financing Activities NET INCREASE IN CASH Cash at beginning of year Cash at end of year Statement of Cash Flows T-Account Worksheet Requirement (e) A/D - Equipment 120,000 Common stock (S1 par) 10,000 Use the formal statement to show activity within the cash account. On this statement, debits to cash correspond to increases and credits correspond to decreases. Pref. stock ($100 par) Accounts receivable 39,175 Accounts payable 66,750 Interest payable Allow. for doubtful acct: 3,000 PICEP - CS 190,000 HHHHHH Unearned revenue PICEP - PS Inventory 84,000 Bonds payable Prepaid insurance 7,440 Retained earnings 134,115 Premium on B/P Treasury stock Equipment 375,000