Question

Kim Kardashian opens a merchandising store. $100,000 in cash, $50.000 in equipment D-A-S.-Hi by ing $300.00 Sept 1 and a building costing $300.000. Sept 2 Purchase Sept 10 Return $5000 of defective merchandise back to Kitson Sept 11 Sold $20,000 worth of merchandise for $50.000 on account to Fred merchandise for $40.000 from Kitson on credit with terms of 2/10. net 30 Segal Co under terms 2/10, net 30, FOB destination Sept 12 Kim pays the balance owing for the purchase on September 2 Sept 12 Paid $200 shipping charges related to the Sept 11 sale to Fred Segal Co Sept 21 Received balance owing for September 11 sale Sept 23 Purchase a vehicle for $75.000 with a useful life of 5 years and a residual Nov 1 Established a petty cash fund for $200 value of $25,000 , Nov 12 Replenished petty cash fund by submiting the following receipts. $50 miscellaneous expenses, $100 delivery charges. $30 entertainment expense. The petty cash box had $25 remaining Nov 12 Increased the Petty Cash fund to $300 Nov 16Kim is being swamped with work and is desperate to seek out a partner She decides to admit her sister Kourtney as partner giving up 25% ownership in exchange for an investment of $18,000. Kim's capital account is $72,000 Dec 16 Adrienne Bailon has a balance of $3000 averdue on their account with DAS In exchange for an extension. DA-S-H accepts a 60-day note at 12% from A. Bailon to settle the past due account Using the mid-month rule, make the necessary adjusting entry to record the depreciation of the vehicle which was purchased on September 23rd. Use the double-declining balance method Recognized revenue on note receivable issued December 16th Merchandise Inventory records indicate a balance of $40.000. A physical account produces a balance of $39,678 H Dec 31 Dec 31 Dec 31 D-A-S-H had credit sales of $320,000. Based on past experience, D-A-S-H estimates 1% of sales to be uncollectable. Dec 31 Year end nominal account balances are as follows Total Revenue 900.000, Total Expenses $600.000, and Kim Kardashian Drawings 25,000 Eanings or losses are spit using a 2 1 ratio in favour of Kim
What are the journal entries for all of dec 31, and show steps on calculations

Answer 1

A	B	C	D	E	F	G	H	I	J
2
3
4		Double declining Balance Method:
5		Cost of Machine	$75,000
6		Salvage Value	$25,000
7		Useful Life	5	years
8		Per year depreciation under straight line	20.00%
9		% depreciation under double declining	40%	=D26*200%
10		Under double declining method beginning net book value is used to calculate depreciation for a period and salvage value is ignored.
11		The depreciation stops when net book value equals the salvage value.
12		In mid month convention, half of the month is taken in which purchase is made.
13
14		Since purchase has been made in Sept 23, therefore half of sept will be taken for depreciation.
15		Total months to depreciate in first year	3.5
16
17		Full Year depreciation using the double declining balance can be calculated as follows:
18		Year	Beginning Net	x	Double declining	=	Depreciation
19			Book Value		rate		Expense
20
21		1	$75,000	x	40%	=	$30,000.00
22
23		Full Year depreciation for 1st year	$30,000.00
24		3.5 month depreciation for 1st year	$8,750.00	=D23*(D15/12)
25
26		Journal entry will be as follows:
27		Account	Debit	Credit
28		Depreciation Expense	$8,750.00
29		Accumulated Depreciaiton		$8,750.00
30
31		Revenue from Notes receivable:
32		Notes Receivable Balance	$3,000
33		Interest rate	12%
34		Number of days from Dec 16 to Dec 31	15
35		Interest revenue	$14.79	=D32*D33*(D34/365)
36
37		Thus journal entry for interest revenue:
38		Account	Debit	Credit
39		Interest receivable	$14.79
40		Interest revenue		$14.79
41
42
43		Adjustment for inventory:
44		Inventory as per Book	$40,000
45		Inventory as per physical count	$39,678
46
47		Loss in inventory	=Inventory in Books - Inventory in physical count
48			$322	=D44-D45
49
50		Loss in inventory is small, therefore it should be adjusted against cost of goods sold.
51		Journal entry for the loss of inventory will be as follows:
52		Accounts	Debit	Credit
53		Cost of goods sold	$322
54		Inventory		$322
55
56		Adjustment for uncollectible amount:
57
58		Credit Sales	$320,000
59		Uncollectible Amount	1%	of sales
60
61		Allowance for doubtful assets	=$320000*1%
62			$3,200
63
64		Journal entry will be as follows:
65		Accounts	Debit	Credit
66		Bad Debt Expense	$3,200
67		Allowance for doubtful accounts		$3,200
68