Question 2

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

SHEFFIELD CORP. Post-Closing Trial Balance December 31, 2016 Debit Credit Cash $18,950 Accounts Receivable 17,470 Allowance for Doubtful Accounts $940 Equipment 15,600 Accumulated DepreciationEquipment 11,700 Buildings 78,000 Accumulated DepreciationBuildings 11,700 Land 15,600 Accounts Payable 9,650 Common Stock 70,200 Retained Earnings 41,430 $145,620 $145,620

During the first quarter of 2017, the following transactions occurred:

1. On February 1, Sheffield collected fees of $9,360 in advance. The company will perform $780 of services each month from February 1, 2017, to January 31, 2018. 2. On February 1, Sheffield purchased computer equipment for $7,020 plus sales taxes of $468. $2,340 cash was paid with the rest on account. Check #455 was used. 3. On March 1, Sheffield acquired a patent with a 10-year life for $7,488 cash. Check #456 was used. 4. On March 28, Sheffield recorded the quarters sales in a single entry. During this period, Sheffield had total sales of $109,200 (not including the sales referred to in item 1 above). All of the sales were on account. 5. On March 29, Sheffield collected $103,740 from customers on account. 6. On March 29, Sheffield paid $12,770 on accounts payable. Check #457 was used. 7. On March 29, Sheffield paid other operating expenses of $76,070. Check #458 was used. 8. On March 31, Sheffield wrote off a receivable of $160 for a customer who declared bankruptcy. 9. On March 31, Sheffield sold for $1,260 equipment that originally cost $8,580. It had an estimated life of 5 years and salvage of $780. Accumulated depreciation as of December 31, 2016, was $6,240 using the straight line method. (Hint: Record depreciation on the equipment sold, then record the sale.)

Bank reconciliation data and adjustment data:

1. The company reconciles its bank statement every quarter. Information from the December 31, 2016, bank reconciliation is:

Deposit in transit: 12/30/2016 $3,900 Outstanding checks #440 2,690 #452 260 #453 670 #454 4,560

The bank statement received for the quarter ended March 31, 2017, is as follows:

Beginning balance per bank $23,230 Deposits: 1/2/2017, $3,900; 2/2/2017, $9,360; 3/30/2017, $103,740 117,000 Checks: #452, $260; #453, $670; #457, $12,770; #458, $76,070 (89,770) Debit memo: Bank service charge (record as operating expense) (100) Ending bank balance $50,360

2. Record revenue earned from item 1 above. 3. $20,280 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. (Hint: You will need to compute the balance in accounts receivable before calculating this.) 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 $940. 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 $7,800. 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. (Hint: Prepare the income statement up to income before taxes and multiply by 30% to compute the amount.)

Record journal entries for transactions 19. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date No. Account Titles and Explanation Debit Credit choose a transaction date February 1 March 1 March 28 March 29 March 31 1. enter an account title for the first transaction enter a debit amount enter a credit amount enter an account title for the first transaction enter a debit amount enter a credit amount choose a transaction date February 1 March 1 March 28 March 29 March 31 2. enter an account title for the second transaction enter a debit amount enter a credit amount enter an account title for the second transaction enter a debit amount enter a credit amount enter an account title for the second transaction enter a debit amount enter a credit amount choose a transaction date February 1 March 1 March 28 March 29 March 31 3. enter an account title for the third transaction enter a debit amount enter a credit amount enter an account title for the third transaction enter a debit amount enter a credit amount choose a transaction date February 1 March 1 March 28 March 29 March 31 4. enter an account title for the fourth transaction enter a debit amount enter a credit amount enter an account title for the fourth transaction enter a debit amount enter a credit amount choose a transaction date February 1 March 1 March 28 March 29 March 31 5. enter an account title for the fifth transaction enter a debit amount enter a credit amount enter an account title for the fifth transaction enter a debit amount enter a credit amount choose a transaction date February 1 March 1 March 28 March 29 March 31 6. enter an account title for the sixth transaction enter a debit amount enter a credit amount enter an account title for the sixth transaction enter a debit amount enter a credit amount choose a transaction date February 1 March 1 March 28 March 29 March 31 7. enter an account title for the seventh transaction enter a debit amount enter a credit amount enter an account title for the seventh transaction enter a debit amount enter a credit amount choose a transaction date February 1 March 1 March 28 March 29 March 31 8. enter an account title for the eighth transaction enter a debit amount enter a credit amount enter an account title for the eighth transaction enter a debit amount enter a credit amount choose a transaction date February 1 March 1 March 28 March 29 March 31 9. enter an account title for the ninth transaction to record depreciation expense enter a debit amount enter a credit amount enter an account title for the ninth transaction to record depreciation expense enter a debit amount enter a credit amount (To record depreciation expense) enter an account title for the ninth transaction to record sale of equipment enter a debit amount enter a credit amount enter an account title for the ninth transaction to record sale of equipment enter a debit amount enter a credit amount enter an account title for the ninth transaction to record sale of equipment enter a debit amount enter a credit amount enter an account title for the ninth transaction to record sale of equipment enter a debit amount enter a credit amount (To record sale of equipment)