Selected transactions completed by Kornett Company during its first fiscal year ended December 31, 2045, were as follows: Jan. 3 Feb. 26 Apr. 14 May 13 17 Issued a check to establish a petty cash fund of $4,500. Replenished the petty cash fund, based on the following summary of petty cash receipts: office supplies, S1,680; miscellaneous selling expense, $570; miscellaneous administrative expense, $880. Purchased $31,300 of merchandise on account, terms 1/10, n/30. The perpetual inventory system is used to account for inventory. Paid the invoice of April 14 after the discount period had passed. Received cash from daily cash sales for $21,200. The amount indicated by the cash register was $21,240 Received a 60-day, 8% note for $180,000 on the Ryanair account. Received amount owed on June 2 note, plus interest at the maturity date. Assume a 360-day year. 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.) Reinstated the Finley account written off on August 24 and received $1,400 cash in full payment. (Record as two entries.) Jun. 2 Aug. 1 24 Sep 15 Record the following on journal page 22 Sep. 15 Purchased land by issuing a $670,000, 90-day note to Zahorik Co., which discounted it at 9%. Assume a 360-day year. 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 October 17. Oct. 17 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: State unemployment 5.4% Federal unemployment 0.8% Amount subject to unemployment taxes: State unemployment $5,000 Federal unemployment 5,000 30 Dec. 14 Journalized the employer's payroll taxes on the payroll. Journalized the payment of the September 15 note at maturity. The pension cost for the year was $190,400, of which $139,700 was paid to the pension plan trustee. 31 Residual Acquisition Useful Life Asset Cost Value Date in Years $0 50 Buildings Office Equip Store Equip $900,000 246,000 112,000 Depreciation Method Used Double-declining-balance Straight-line Straight-line January 2 January 3 July 1 26,000 12,000 5 10 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 8 years 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 Vacation pay expense for December, $10,500. 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 Interest was accrued on the note receivable received on October 17. Assume a 360-day year. * Refer to the Chart of Accounts for exact wording of account titles. Round your answers to the nearest dollar 5. Based on the following information and the post-closing trial balance that follows, prepare a balance sheet in report form at December 31 of the current year. Be sure to complete the heading of the balance sheet. Enter assets in the order in which they appear in the post-closing trial balance. Refer to information given in the problem and the Labels and Amount Descriptions list for exact wording of text entries. There is no need to include "(current portion)" or a due date with any account titles. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Round your answers to the nearest dollar 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, 2015 ACCOUNT TITLE DEBIT CREDIT 1 Petty Cash 4,500.00 2 Cash 243,960.00 3 Notes Receivable 100,000.00 4 Accounts Receivable 470,000.00 5 Allowance for Doubtful Accounts 16,000.00 6 Inventory 320,000.00 7 Interest Receivable 1,875.00 8 Prepaid Insurance 45,640.00 9 Office Supplies 13,400.00 10 Land 654,925.00 900,000.00 36,000.00 246,000.00 44,000.00 11 Buildings 12 Accumulated Depreciation-Buildings 13 Office Equipment 14 Accumulated Depreciation Office Equipment 15 Store Equipment 16 Accumulated Depreciation Store Equipment 17 Mineral Rights 18 Accumulated Depletion 112,000.00 5,000.00 546,000.00 30,000.00 19 Patents 42,000.00 25,470.00 4,710.00 40,000.00 20 Social Security Tax Payable 21 Medicare Tax Payable 22 Employees Income Tax Payable 23 State Unemployment Tax Payable 24 Federal Unemployment Tax Payable 2 Salaries Payable 26 Accounts Payable 270.00 40.00 157,000.00 131,600.00 28,000.00 27 Interest Payable 28 Product Warranty Payable 76,000.00 10,500.00 29 Vacation Pay Payable 30 Unfunded Pension Liability 50,700.00 700,000.00 31 Notes Payable 32 Common Stock 500,000.00 33 Retained Earnings 1,845,010.00 34 Totals 3,700,300.00 3,700,300.00 ASSETS 110 Petty Cash REVENUE 410 Sales 610 Interest Revenue 611 Gain on Sale of Office Equipment 111 Cash 112 Notes Receivable 113 Accounts Receivable 114 Allowance for Doubtful Accounts 115 Inventory 121 Interest Receivable 122 Prepaid Insurance 123 Office Supplies 130 Land 131 Buildings 132 Accumulated Depreciation-Buildings 133 Office Equipment 134 Accumulated Depreciation Office Equipment 135 Store Equipment 136 Accumulated Depreciation-Store Equipment 137 Mineral Rights 138 Accumulated Depletion EXPENSES 510 Cost of Goods Sold 521 Repairs Expense 522 Rent Expense 523 Insurance Expense 524 Bad Debt Expense 525 Office Supplies Expense 529 Cash Short and Over 551 Sales Salaries Expense 552 Office Salaries Expense 553 Payroll Tax Expense 554 Vacation Pay Expense 555 Pension Expense 561 Product Warranty Expense 571 Depreciation Expense-Buildings 572 Depreciation Expense-Office Equipment 573 Depreciation Expense-Store Equipment 141 Patents LIABILITIES 574 Depletion Expense 575 Amortization Expense-Patents 581 Miscellaneous Selling Expense 582 Miscellaneous Administrative Expense 710 Interest Expense 711 Loss on Sale of Office Equipment 211 Social Security Tax Payable 212 Medicare Tax Payable 213 Employees Income Tax Payable 214 State Unemployment Tax Payable 215 Federal Unemployment Tax Payable 216 Salaries Payable 221 Accounts Payable 222 Interest Payable 223 Product Warranty Payable 231 Vacation Pay Payable 232 Unfunded Pension Liability 241 Notes Payable EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends 313 Income Summary Labels and Amount Descriptions Amount Descriptions (Bank Reconciliation) Adjusted balance Bank service charges Deposit in transit Error in recording check NSF check Outstanding checks Labels (Balance Sheet) Common stock Current assets Current liabilities December 31, 2045 For the Year Ended December 31, 2045 Intangible assets Long-term liabilities Property, plant, and equipment Retained earnings Amount Descriptions (Balance Sheet) Net cash flows from financing activities Net cash flows from investing activities Net cash flows from operating activities Amount Descriptions (Balance Sheet) Net cash flows from financing activities Net cash flows from investing activities Net cash flows from operating activities Net increase (decrease) in cash Total assets Total current assets Total current liabilities Total liabilities Total long-term liabilities Total liabilities and stockholders' equity Total property, plant, and equipment Total stockholders' equity JOURNAL Score: 34/336 ACCOUNTING EQI DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES 1 Dec. 31 Miscellaneous Administrative Expense 750.00 2 Cash 750.00 + 3 Dec. 31 Accounts Payable 700.00 1 4 Adjusting Entries 5 6 7 8 9 10 11 12 13 14 15 16 17 Feedback Check My Work A. Under the analysis of receivables method, Allowance for Doubtful Accounts is the focus of the estimation process. The amount of the adjusting entry is the amount that will yield an adjusted balance for Allowance for Doubtful Accounts equal to that estimated by the aging schedule. B. When inventory shrinkage occurs, the missing inventory amount is recorded as cost of merchandise sold and merchandise inventory. is decreased C. Increase insurance expense and reduce the prepaid asset for the expired insurance. D. Increase supplies expense and reduce the office supplies asset for those used. E. (a) Total cost of the asset minus the residual value equals the depreciable cost. (b) Straight-line deprecation allocates the depreciable cost of the asset equally over the period of use. (c) Double-declining- balance rate is 2 x straight-line rate. However, when the double-declining-balance method is used the estimated residual value is not considered. (d) Double-declining-balance depreciation uses book value in the computation. In the first year of calculating depreciation, the balance in the accumulated depreciation account is zero. (e) To adjust depreciation at year-end, increase an expense and increase accumulated depreciation for each asset type or group. F. Record the amortization expense and reduce the patents account. G. Divide the cost of the resource by the estimated total units. Multiply the depletion rate by the quantity extracted. H. Record an expense and a liability for the vacation pay. I. Record an expense and a liability for the products sold times the estimated warranty percentage. J. Calculate the number of days of interest that accrues between Oct. 17 and December 31. Kornett Company Score: 212/436 Balance Sheet December 31, 2045 1 Assets 2 Current assets: 3 Petty cash $4,500.00 4 Cash 243.960.00 5 Notes receivable 100,000.00 Accounts receivable $470,000.00 7 16,000.00 454,000.00 8 Allowance for doubtful accounts Inventory Interest receivable 320,000.00 1,875.00 10 Prepaid insurance 45,640.00 11 Office supplies 13,400.00 12 Total current assets $1,183,375.00 13 Property, plant, and equipment: 14 Land 15 Buildings Accumulated Depreciation Office equipment 16 17 18 Less accumulated depreciation 19 20 Store equipment Less accumulated depreciation 21 Mineral rights Less accumulated depletion 22 23 24 Total property, plant, and equipment: 25 Patents 26 Total assets 27 Liabilities 28 Current liabilities: 31 32 29 Social security tax payable 50 Medicare tax payable Employees federal income tax payable State unemployment tax payable Federal unemployment tax payable Salaries payable Accounts payable 36 Interest payable 33 34 35 37 39 40 . Product warranty payable 38 Vacation pay payable Notes payable Allowance for doubtful accounts 4 Total current liabilities: 4 Non Current Liabilties 43 Unfunded pension Liability 44 Vacation pay payable Notes payable 46 Total Non Current Liabilities Stockholders' Equity 43 J. Cornett Capital 45 47 49 50 51