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BUS ADM-201 Fall 2012 EXTRA CREDIT 2 - Due in DS week of November 26

GRADING: Worth 15 points. Partially credit will only be given if you attempt all requirements a through g listed below.

Aberkonkie & Fitch Corporation prepares quarterly financial statements. The balance sheet at 12/31/12 is presented below.
Balance Sheet
12/31/12
Cash $ 24,300 Accounts payable $ 12,370
Accounts receivable 22,400 Common stock 90,000
Allowance for doubtful accounts (1,200) Retained earnings 53,130
Equipment 20,000
Accumulated depreciation - equipment (15,000)
Land 20,000
Building 100,000
Accumulated depreciation - building (15,000)
$ 155,500 $155,500


During the first quarter of 2013, the following transactions occurred:

1. Aberkonkie & Fitch performed services during the first quarter for $140,000 on account.

2. On 2/1/13, Aberkonkie & Fitch collected fees of $12,000 in advance for $1,000 of services to be performed each month from 2/1/13 to 1/30/14.

3. On 2/1/13, Aberkonkie & Fitch purchased computer equipment for $9,000 plus sales taxes of $600. $3,000 cash was paid with the rest on account. Check #455 was used.

4. Aberkonkie & Fitch collected $133,000 on 3/5/13 from customers on account.

5. Aberkonkie & Fitch paid $16,370 on accounts payable. Check #456 was used.

6. Paid other operating expenses of $97,525. Check #457 was used.

7. Acquired a patent with a 10-year life for $9,600 cash on 3/1/13. Check #458 was used.

8. Wrote off a customer receivable of $200 who went bankrupt.
9. On 3/31/13, Aberkonkie & Fitch sold for $1,620 cash equipment which originally cost $11,000. It had an estimated life of 5 years and salvage of $1,000. Accumulated depreciation as of 12/31/12 was $8,000 using the straight line method. Record depreciation on the equipment sold, then record the sale.

10. AJE: Record revenue earned from item 2 above.

11. AJE: $26,000 of accounts receivable at 3/31/13 are not due yet. The bad debt percentage for these is 4%. The balance of A/R are past due. The bad debt percentage for these is 23.75%. Record bad debt expense.
HINT: You will need to compute the balance in accounts receivable before calculating this.

12. AJE: Depreciation is recorded on the equipment still owned at 3/31/13. The new equipment purchased in February is being depreciated on a double declining basis over 5 years and salvage value was estimated at $1,000. The old equipment still owned is being depreciated over a 10 year life using straight line with no salvage value.
13. AJE: Depreciation is recorded on the building on a straight-line basis based on a 30-year life and a salvage value of $10,000.

14. AJE: Amortization is recorded on the patent.

15. The company reconciles its bank statement every quarter. Information from the 12/31/12 Bank Reconciliation is:
Deposit in transit: 12/30/12 $5,000
Outstanding Checks #440 3,444
#452 333
#453 865
#454 5,845
The Bank statement received for the quarter ended 3/31/13 is as follows:
Beginning balance per bank $ 29,787
Deposits: 1/2/13 $5,000, 2/2/13 $12,000, 3/6/13 $133,000 150,000
Checks: #452 $333, #453 $865, #456 $16,370, #457 $97,525 (115,093)
Debit memo: Bank service charge (Record as operating expense) ( 100)
Ending bank balance $ 64,594

16. AJE: The income tax rate is 30%. This amount will be paid when the tax return is due in April. Hint: Prepare the income statement up to income before taxes and multiply by 30% to compute the amount.




REQUIRED: Print out the solution pages for the general ledger, journal and worksheet that follow and enter the following transactions. I suggest that you use a pencil.
a. Enter the transactions 1-9 in the general journal provided on the following pages.
b. Enter the 12/31/12 balances in ledger accounts. Use the ledger account running balance format accounts provided on the following pages.
c. Post the journal entries to the ledger accounts for items 1 – 9.
d. Prepare an unadjusted trial balance at March 31 and enter on the worksheet. Then complete the other worksheet columns. (See below.)
Worksheet requirement: Using your unadjusted trial balance above and the data for adjusting entries, prepare a 10 column worksheet similar to the one on page 195 in the chapter 4 appendix of your text.
e. Prepare a bank reconciliation in good form. (Item 15 above.) Use your own paper. Record the necessary AJE.
f. Journalize and post all other adjusting entries. (Items 10 - 16)
g. Prepare an income statement and a retained earnings statement for the quarter ended 3/31/13 and a classified balance sheet at 3/31/13. Use your own paper. (No formatted sheets are supplied as we did for the other items.)


EXTRA CREDIT TWO SOLUTION – Name ________________________
DS ____________
Part a, e and f
Extra Credit 2 – General Journal Debit Credit
a.1.

a.2.

a.3.


a.4.

a.5.

a.6.

a.7.

a.8.

a.9.





a.10.

a.11.

a.12.

a.13.

a.14.

a.15.

a.16.






Part b, c and d

General Ledger

b. CASH DR CR BALANCE
Beginning

item 2

item 3

item 4

item 5

item 6

item 7

item 9


Item 15


b. ACCOUNTS RECEIVABLE DR CR BALANCE
Beginning

item 1

item 4

item 8



b. ALLOW FOR DOUBTFUL ACCTS DR CR BALANCE
Beginning

item 8

item 11






b. EQUIPMENT DR CR BALANCE

Beginning
Item 3
Item 9



b. ACCUM DEPR EQUIPMENT DR CR BALANCE

Beginning

item 9

item 9

Item 12



b. LAND DR CR BALANCE
Beginning



b. BUILDING DR CR BALANCE
Beginning



b. ACCUM DEPR BUILDING DR CR BALANCE
Beginning

item 13




b. PATENTS DR CR BALANCE
item 7

item 14





b. ACCOUNTS PAYABLE DR CR BALANCE
Beginning

item 3

item 5



b. UNEARNED REVENUE DR CR BALANCE
item 2


item 10


b. INCOME TAXES PAYABLE DR CR BALANCE
item 16



b. COMMON STOCK DR CR BALANCE
Beginning





b. RETAINED EARNINGS DR CR BALANCE
Beginning





b. SERVICE REVENUE DR CR BALANCE
item 1

item 10




b. OPERATING EXPENSES DR CR BALANCE
item 6


Item 15


b. DEPRECIATION EXPENSE DR CR BALANCE
item 9

item 12

item 13





b. AMORTIZATION EXPENSE DR CR BALANCE
item 14



b. LOSS ON DISPOSAL DR CR BALANCE
item 9



b. BAD DEBT EXPENSE DR CR BALANCE
item 11



b. INCOME TAX EXPENSE DR CR BALANCE
item 16


















Worksheet (d)

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