Question
Unadjusted Trial Balance At December 31, 20XX Acc. # Account Name Debits Credits 100 Cash $ 66,000 110 Accounts receivable 160,000 115 Allowance for doubtful
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Unadjusted Trial Balance | |||
At December 31, 20XX | |||
Acc. # | Account Name | Debits | Credits |
100 | Cash | $ 66,000 |
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110 | Accounts receivable | 160,000 |
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115 | Allowance for doubtful accounts |
| $ 7,000 |
120 | Inventory | 50,000 |
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135 | Prepaid insurance | 27,000 |
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136 | Prepaid advertising | - |
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150 | Land | 235,000 |
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160 | Building | 240,000 |
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165 | Accumulated depreciation - building |
| 54,000 |
170 | Equipment | 150,000 |
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175 | Accumulated depreciation - equipment |
| 41,250 |
190 | Notes receivable | 155,000 |
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195 | Interest receivable | - |
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200 | Accounts payable |
| 135,000 |
215 | Interest payable |
| - |
219 | Income tax payable |
| - |
230 | Accrued liabilities |
| 32,000 |
240 | Unearned revenue |
| 65,000 |
250 | Notes payable - current portion |
| - |
255 | Notes payable - long-term portion |
| 100,000 |
270 | Bonds payable |
| 100,000 |
300 | Common stock |
| 500,000 |
310 | Retained earnings |
| 21,000 |
350 | Dividends | 5,000 |
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400 | Sales |
| 1,309,750 |
450 | Interest revenue |
| 86,000 |
500 | Cost of goods sold | 616,000 |
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510 | Administrative and general expenses | 97,000 |
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515 | Insurance expense | - |
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520 | Selling expenses | 194,000 |
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531 | Depreciation expense - building | - |
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532 | Depreciation expense - equipment | - |
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550 | Interest expense | 60,000 |
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599 | Income tax expense | - |
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600 | Loss on sale of equipment | 60,000 |
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910 | Loss from operation of discontinued | 75,000 |
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segment of business |
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915 | Loss from disposal of discontinued | 261,000 |
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segment of business |
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$ 2,451,000 | $ 2,451,000 |
The single compound journal entry for annual depreciation of building and equipment needs to be recorded. All buildings and equipment owned by the company are depreciated according to the straight-line method of depreciation. Kurek Corporation never assigns residual values to its buildings or equipment, and buildings are depreciated over 20 years and equipment is depreciated over 16 years.
When reviewing the unadjusted trial balance as part of the review for needed prepayment (deferral) adjusting journal entries, it was determined that $55,500 of the services for which the $65,000 unearned revenue item was initially recorded have since been performed.
The work performed on the unearned revenue item referenced in journal entry #2 reminded the CFO of Kurek Corporation that a deposit of $60,000 was received on April 1, 20XX for 12 monthly deliveries set to begin on April 15, 20XX and taking place on the 15th of each of the subsequent months until the contract expired. When the cash payment was received on April 1, the following journal entry was recorded:
Db. Cash $60,000
Cr. Sales $60,000
The prepaid insurance item in the unadjusted trial balance was recorded when a $27,000 cash payment was made on September 1, 20XX for insurance services to be received over the period of September 1, 20XX through August 31, 20X1.
On December 1, 20XX a $20,000 cash payment was made to Comcast Cable Co. for 5 television-commercial-spots that were to air over the course of the next two months. 3 of the 5 spots paid for were aired during December. On December 1, when the cash payment was made, the following journal entry was recorded:
Db. Selling expenses $20,000
Cr. Cash $20,000
Unpaid and unrecorded interest charges on the bonds and notes payable amount to $7,500.
The $155,000 notes receivable was issued and recorded on June 1, 20XX. The note is a two year note with a stated interest rate of 12.0%. All interest will be received on the date of maturity along with the repayment of the principle. None of the interest pertaining to this note has yet been recorded during 20XX.
The $100,000 notes payable currently recorded entirely as long-term is being paid off in five equal $20,000 installments occurring annually on October 1. As a result, a portion of this $100,000 needs to be reclassified as short-term, since some of it is due within the next twelve months.
After completing the income statement for the year it was determined that the income tax effect for the year was a net $17,352 (net makes reference to the fact that there are multiple income tax items embedded within the income statement as a result of certain net of tax items). The income tax payment to the government will be made on March 15, 20X1.
| General Journal | J1 | ||||||||||||||
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Entry # | Date | Account Names | Ref. | Debit | Credit |
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1 |
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To record annual depreciation on building and equipment |
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2 |
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To record service rendered to a customer that originally paid cash in advance of service |
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3 |
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To eliminate from sales the remainder of a deposit for which no services have yet been rendered |
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4 |
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To record portion of insurance prepayment that relates to services received |
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5 |
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To record portion of advertising charges for which service has yet been received |
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6 |
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To record interest charges on notes and bonds payable |
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7 |
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To record interest associated with note receivable |
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8 |
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To reclassify current portion of notes payable out of long-term balance |
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9 |
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To record current year income tax effect |
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