Reference no: EM132936840

Question - Jamukha Corporation prepares annual financial statements. The balance sheet at December 31, 2018, is presented below. During 2019 the following transactions occurred:

Asset

Cash 12,450

Accounts receivable 7,500

Allowance for doubtful accounts (825)

Inventory 92,150

Prepaid insurance 4,500

Equipment 325,000

A/D - Equipment (180,000)

260,775

Liabilities and Stockholders' Equity

Accounts payable 35,275

Common stock ($1 par) 10,000

Paid-in capital in excess of par - Common stock 140,000

Retained earnings 75,500

260,775

1. On January 8th, borrowed $20,000 in cash from Curtis Corp. in exchange for a note payable. The note has a maturity of January 8 th, 2020. Interest of 7% is due at maturity.

2. On January 14th, purchased $14,000 inventory on account. Jamukha Corp. uses a perpetual inventory system (this means you will do COGS entries when you make sales, you will not have to calculate COGS).

3. During January, Jamukha made sales of $85,000, plus 5.6% sales tax, to customers on account. Cost of goods sold was $43,600. The company uses a perpetual inventory system. Book all the sales in one entry on January 31st.

4. On February 2nd, Jamukha issued 1,800 shares of common stock for $17 per share.

5. On February 28th , Jamukha issued 10-year, $25,000 face value, 6% bonds at 94. The bonds pay interest every September 1 st and March 1 st.

6. During February, Jamukha made sales of $22,000, plus 5.6% sales tax, to customers on account. Cost of goods sold was $9,750. Book all sales in one entry on February 28th.

7. On March 1st Jamukha purchased a truck for $26,000. Jamukha paid $10,000 in cash and took out a Note Payable for the remaining amount. The note has a maturity of March 1st, 2024 and has interest of 8% due at maturity. Use the equipment account for the truck. Cash 12,450 Accounts payable 35,275 Accounts receivable 7,500 Common stock ($1 par) 10,000 Allowance for doubtful accounts (825) Paid-in capital in excess of par - Common stock 140,000 Inventory 92,150 Retained earnings 75,500 Prepaid insurance 4,500 Equipment 325,000 A/D - Equipment (180,000) 260,775 260,775 Jamukha Corporation Balance Sheet December 31, 2018 Assets Liabilities and Stockholders' Equity 2

8. On March 2nd Jamukha sold an old piece of equipment for $2,000 cash. The equipment had an original cost of $210,000 and as of December 31st accumulated depreciation was $180,000. This equipment had a 10-year useful life and no salvage value. This transaction is exempt from sales tax.

9. On March 2nd Jamukha paid $30,275 of its accounts payable.

10. On March 3rd Jamukha paid general expenses of $12,500. Assume these were paid as incurred (debit expenses).

11. On March 5th Jamukha received $75,000 in cash from customers. Jamukha had not written off the receivables for any of these customers.

12. On March 14th Jamukha issued 500 shares of $100 par, 5% cumulative preferred stock for $180,000 cash.

13. On March 25th Jamukha paid the sales tax collected from customers to the State of Wisconsin.

14. On March 26th Jamukha purchased 2,000 shares of Jamukha Corporation common stock from a disgruntled shareholder for $41 per share.

15. On March 28th Jamukha declared a dividend on all outstanding shares on record as of March 28th, totaling $12,000.

16. During March, Jamukha made sales of $45,000, plus 5.6% sales tax, to customers on account. Cost of goods sold was $18,500. Book all sales in one entry on March 31st .

17. On March 29th Jamukha recorded salaries and payroll taxes. Employee's gross salaries were $24,000. FICA tax was withheld at a rate of 7.65%. Federal income taxes (FIT) of $3,200 were withheld, and state income taxes (SIT) of $1,200 were withheld. The federal unemployment tax (FUTA) rate was 1%, and the state unemployment tax (SUTA) rate was 3.25%. No cash has been paid yet, so record all the amounts due in the appropriate payable accounts. Adjusting Journal Entries:

18. Straight-line depreciation with a 10-year useful life and no salvage value is used for equipment purchased in previous years. The equipment (truck) purchased on March 1st (#7) is depreciated using double-declining balance with a useful life of 25 years and a $30,000 salvage value. (Hint: The equipment was purchased at the beginning of March and has one month of depreciation, also remember how to calculate depreciable base for declining balance)

19. Accrue interest payable for both notes and also accrue bond interest payable and amortize bond discount/premium. Jamukha Corp. uses straight line amortization. (Hint: The notes and bond were issued part through the year)

20. The prepaid insurance relates to a policy purchased on December 31, 2017. This insurance expires at a rate of $250 per month. Record as a general expense.

21. Jamukha estimates that 5.25% of accounts receivable are uncollectible.

22. Jamukha Corp. is an S-corporation and is not subject to income tax.

Required - Print out the solution pages for the general journal, ledger, and worksheet that follow and enter the following transactions. I suggest that you use a pencil. a. Enter the transactions numbered 1-17 in the general journal provided on the following pages. b. Post the journal entries to the ledger accounts for items 1-17. Look at the cash account for an example of how to use the running balance ledger. I have completed the first two lines of it for you. It is a good idea to keep track of whether your balance column is a debit or a credit, particularly for contra accounts.