Question

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Chapter Review 10-7i Comprehensive Problem 3 Selected transactions completed by Komett Company during its first fiscal year ended December 31, 20Y5, were as follows GENERAL LEDEER Jan ssued a check to establish a petty cash fund of $4,500 3. Feb. 26. Replenished the petty cash fund, based on the tollowing summary of petty cash receipts: ofice supplies, 31,680: miscellaneous selling expense,$570; miscelaneouS administrative expense, $880. Apr. Purchased $31,300 of merchandise on accounıt, terms 14. 1/10, n/30. The perpetual inventory system is used to account for inventory May Paid the invaice af April 14 after the discount period had 13. passed. 17 Received cash from daily cash sales for $21,200. The amount indicated by the cash register was $21.240 June Received a 60-day, 8% note for $180,000 on the Ryanair 2. account Aug Received amount awed on June 2 note, plus interest at 1. the maturity date. 24. Receved $7,600 on the Finley account and wrote off the remainder owed on a $9,000 accounts receivable balance (The allowance methad is used in accounting for uncoliectble receivables.)

Answer 1

Ans: Kornett Company

1)    Journal Entries

Date	Particulars	Debit ($)	Credit($)
3.Jan	Petty Cash A/c Dr.    To Cash At bank A/c ( Being Petty cash Fund Created)	4,500	4,500
28.Feb	Office Expenses A/c Dr. Miscellaneous selling expenses A/c Dr. Administrative Expenses a/c Dr. To Petty Cash A/c ( Being Petty Cash Expenses recorded)	1,680 570 880	3130
14. April	Purchases A/c Dr.    To Account Payableable A/c ( Being Purchase of Inventory on term 1/10, n/30)	31,300	31,300
13.May	Account Payable A/c Dr.    To Cash At bank A/c (Being payment made for the purchases made on 14. April )	31,300	31,300
17.May	Cash A/c Dr. Petty Theft A/c Dr.    To Sales A/c ( Being cash Sales recorded with a difference in Cash in hand and cash as per cash register)	21,200 40	21,240
2.June	Note Receivable A/c Dr. To Cash At Bank A/c ( Being Amount given to Ryanair Account against notes which is payable in 60days with interest 8%)	180,000	180,000
1. Aug	Cash at Bank A/c    Dr.    To Interest A/c Dr.    To Note Receivable A/c ( Being Payment to Ryanair for note payable raised for 60 days along with Interest)	182,400	2,400 180,000
24.Aug	Cash at Bank A/c Dr. Allowance for Account Receivable A/c Dr.    To Account Receivable A/c ( Being Amount received from Finley Account as full settlement For $ 9,000)	7,600 1,400	9,000
15.Sep	Cash at Bank A/c Dr. To Profit and Loss A/c ( Being amount received from Finley which is already set off from allowance for Account Receivable A/c)	1,400	1400
15.Sep	Land A/c Dr. To Note Payable A/c (Being Land purchased by issue of Note payable to Zahorik Co. payable in 90 days)	670,000	670,000
17. Oct	Cash A/c Dr. Note Receivable A/c Dr. Loss on sale of office equipment A/c Dr. Accumulated Depreciation on Office Equipment A/c Dr.    To Office Equipment A/c ( Being sale of Office Equipment )	135,000 100,000 21,000 64,000	320,000
30.Nov	Salaries A/c Dr. To Cash at Bank A/c    To Income Tax Withheld A/c    To Social Security Tax A/c To Medicare Tax withheld A/c To State Unemployement Tax A/c    To Federal unemployement Tax A/c ( being payment of Salary for the Month of November)	212,250	147,065 39,266 12,735 3,184 5,000 5,000
14.Dec	Note Payable A/c - Dr.    To Cash at Bank A/c ( Being Payment of Note Payable Issued)	670,000	670,000
31.Dec	Pension Expense A/c Dr.    To Cash at bank A/c Dr. To Pension Fund Payable A/c (Being Pension Fund Expenses recorded)	190,400	139,700 50,700

2) Bank Reconciliation

Particulars		Amount ($)
Balance as per Bank Ledger		245410
Add
Checks Outstanding on 31 December		68540
Less
Deposit in transit		29500
Bank Service Charges		750
Payment of $12,700 incorrectly recorded in books as $12,000		700
Balance as bank statement		283000

3) Adjusted Journal Entries

Date	Particular	Debit ($)	Credit ($)
	Bank Charges A/c Dr. To Cash at Bank A/c (Being Bank Charges recorded)	750	750
	Account Payable A/c Dr. To Cash at Bank A/c ( Being error committed on Payment of $12,700 incorrectly recorded in books as $12,000 is rectified)	700	700

4) Adj8usted Journal Entries

Date	Particular	Debit ($)	Credit ($)
	Bad Debts A/c Dr.    To allowance for Doubtful A/c ( Being entry for recording estimated bad debts)	16,000	16,000
	Cost of goods sold A/c Dr.    To Inventory A/c (being entry for usage of Inventory for production)	3,300	3,300
	Insurance Expense A/c Dr. To Prepaid Insurance A/c (Being prepaid Insurance become due in this year)	22,820	22,820
	Office Expenses A/c Dr.    To Office Supplies A/c ( Being Office supplies used during the Year)	3,920	3,920
	Depreciation A/c Dr. To Accumulated Depreciation On Building To Accumulated Depreciation On Office Equipment A/c To Accumulated Depreciation On Store Equipment A/c ( Being Depreciation Recorded )	56600	3600 44000 10000
	Amortization Expense A/c Dr.    To Patent A/c (Being Patent Amortized during the expected life of 8 years)	6,000	6,000
	Amortization Expense A/c Dr. To Mineral Rights A/c ( Being Mineral rights are amortized on the basis of estimated capacity used ((50,000 tons / 910,000)*546,000)	30,000	30,000
	Vacation expenses A/c Dr.    To Vacation expenses payable A/c. ( Being Vacation expenses Accrued recorded)	10,500	10,500
	Interest Receivable A/c Dr. To Interest A/c ( Being Interest Accrued on Note receivable takin a year is of 360 days)	1,875	1,875

Computation of Deprecaition

	Life	Cost	Residual Value	Depreciation By SLM	Depreciation By Double diminishing method
Building	50	90000		1800	3600
Office Equipment\	5	246000	26000	44000
Store Equipment	10	112000	12000	10000