BUS ADM-201 Spring 2016 EXTRA CREDIT TWO Due in DS week of April 18

GRADING: Worth 15 points. Partially completed problems will not be accepted. If

you complete all items requested, you will earn at least half the points. The
remaining points are dependent on accuracy of your answers!
Cheating: Anyone who is discovered copying or allowing someone else to copy
their answer will forfeit ALL extra credit points (and the opportunity to earn extra
credit) for the entire semester.
Konkweiser Inc. prepares quarterly financial statements. The balance sheet at 12/31/15 is
presented below.
Balance
Sheet
12/31/2015
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
(15,000
depreciation - equipment
)
Land
20,000
Building
100,000
Accumulated
(15,000
depreciation building
)
$ 155,500
$155,500
During the first quarter of 2016, the following transactions occurred:
1. Konkweiser performed services during the first quarter for $140,000 on account.
2. On 2/1/16, Konkweiser collected fees of $12,000 in advance for $1,000 of services to be
performed each month from 2/1/16 to 1/30/17.
3. On 2/1/16, Konkweiser 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. Konkweiser collected $133,000 on 3/5/16 from customers on account.
5. Konkweiser 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 3/1/16. Check #458 was used.

8. Wrote off a customer receivable of $200 who went bankrupt.

9. On 3/31/16, Konkweiser 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
12/31/15 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 3/31/16 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 3/31/16. 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 12/31/15
Bank Reconciliation is:
Deposit in transit:
Outstanding Checks

12/30/15
$5,000
#440
3,444
#452
333
#453
865
#454
5,845
The Bank statement received for the quarter ended 3/31/16 is as follows:
Beginning balance per bank
Deposits: 1/2/16 $5,000, 2/2/16 $12,000, 3/6/16 $133,000
Checks: #452 $333, #453 $865, #456 $16,370, #457 $97,525
Debit memo: Bank service charge (Record as operating expense)
Ending bank balance

29,787
150,000
(115,093)
(
100)
$ 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 12/31/15 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
194 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 3/31/16 and a classified balance sheet at 3/31/16. Use your own paper. (No
formatted sheets are supplied as we did for the other items.)

h. EXTRA CREDIT TWO SOLUTION Name ________________________

Part a, e and f

DS

____________

Extra Credit 2 General Journal

a.1. Receivable
Revenue
a.2. Cash
Liability
a.3. Purchase
Tax Expense
Liability
a.4. Cash
Receivables
a.5. Payable
Cash
a.6. Operating Expense
Cash
a.7. Patent Asset
Cash
a.8. Allowance for doubtful debts
Receivables
a.9. Depreciation
Accumulated Depreciation
Cash
Sales Asset`
Impairment loss
Asset
a.10
.
Prepaid Income
Income
a.11. Bad debt expense
Allowance for Receivables
a.12
.
Depreciation
Acc-Depreciation Equipment
a.13
.
Depreciation
Accumulated Depreciation
a.14
.
Amortization
Patent
a.15
.
Bank expense
Cash
a.16 Tax Expense

Debit
140000

Credit
140000

12000
12000
9000
600
9600
133,000
133000
16370
16370
97525
97525
9600
9600
200
200
500
500
1620
1620
880
880
2000
2000
855
855
640
640
750
750
80
80
100
100
12412
4

.
Tax Payable

12412

Part b, c and d
General Ledger
b.

CASH

DR

Beginning

24300

item 2

12000

item 3
item 4

BALANCE

3000
133000

item 5

16370

item 6

97525

item 7

9600

item 9

1620

Item 15
b.

CR

100

ACCOUNTS RECEIVABLE

DR

Beginning

22400

item 1

140000

CR

item 4

133000

item 8

200

DR.44325
BALANCE

DR.29200
b.

ALLOW FOR DOUBTFUL

ACCTS

DR

Beginning

CR
1200

BALANCE

item 8

200

item 11

b.

152

EQUIPMENT

DR

Beginning

20000

Item 3

9600

Item 9

b.

CR

11000

ACCUM DEPR EQUIPMENT

DR

Beginning

CR

500

item 9

8500

Item 12

b.

DR

CR

CR.7640
BALANCE

CR

DR.20000
BALANCE

CR

DR.100000
BALANCE

20000

BUILDING
Beginning

b.

640

LAND
Beginning

DR.18600
BALANCE

15000

item 9

b.

CR.1152
BALANCE

DR
100000

ACCUM DEPR BUILDING

DR

Beginning

15000

item 13

750
CR.15750

b.

PATENTS
item 7

DR

DR

12370

item 3

6600
16370

UNEARNED REVENUE

item 10

DR

2000

INCOME TAXES PAYABLE

DR

COMMON STOCK

DR

CR.10000
BALANCE

CR

CR.12412
BALANCE

90000

RETAINED EARNINGS

DR

Beginning

b.

CR
12412

Beginning

b.

CR

CR.2600
BALANCE

12000

item 16
b.

DR.9520
BALANCE

Beginning

item 2

b.

CR

80

ACCOUNTS PAYABLE

item 5
b.

BALANCE

9600

item 14

b.

CR

CR

CR.90000
BALANCE

53130

SERVICE REVENUE

DR

CR

item 1

140000

item 10

2000

CR.53120
BALANCE

CR.142000

b.

b.

b.

OPERATING EXPENSES

DR

CR

BALANCE

DR

CR

DR.99515
BALANCE

DR

CR

DR.80
BALANCE

DR

CR

DR.880
BALANCE

CR

DR.152
BALANCE

Item 15

100

DEPRECIATION EXPENSE
item 9

500

item 12

640

item 13

750

AMORTIZATION EXPENSE
80

LOSS ON DISPOSAL
880

BAD DEBT EXPENSE

item 11

b.

BALANCE

97525

item 9
b.

CR

item 6

item 14
b.

DR

152

INCOME TAX EXPENSE

item 16

DR
12412

DR.12412

Worksheet (d)

10

11