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ACC-1A Lecture Notes - Lecture 6: Accounts Payable, Promissory Note, General Ledger

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School
RCC
Department
Accounting
Course
ACC-1A
Professor
corr

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Document Summary

Journal entries are, essentially, a shorthand version on transaction analysis. They are prepared using the rules of debit and credit. Note that sales affect four accounts: sales revenue & cash/receivable, inventory & cogs. Allocation of the cost of a noncurrent asset to expense over the life of an asset. To recognise the consumption of the asset"s economic value. Accumulated depreciation (a contra asset account, b/s) shows all depreciation charged against an asset to date. Depreciation expense (i/s) shows only this year"s depreciation allocation. Asset costs 000 with a life of 4 years and no estimated salvage value. Dr depreciation expense cr accumulated depreciation . Accounts payable (ap): accounts payable are dollar amounts owed to others for goods, supplies and services purchased on open account. Notes payable (np): notes payable is evidenced by a promissory note or bill of exchange. (e. g. credit purchase of equipment) the interest-bearing characteristic and the written documentation distinguish np from ap.

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Related Questions

Czar was authorized to issue 3,000,000 shares of $1 par Common Stock but has only issued 520,000 shares of common stock as of 12/31/2018. No new shares were issued during 2018.

1. On the “Adjusting Journal Entries” worksheet, prepare in journal entry form all adjusting and correcting journal entries based on the following information. All information was provided to you as of 12/31/2018. (Round all numbers to the nearest dollar). Label journal entries a through t.

P- On 2,1, 2018, Czar rented a portion of one store to Pellston Inc. The contract was for 15 months and Czar required all of the cash up front. The rent is being earned equally each month. This is the only item in which rent is being earned by the company.

Q- Czar started to lease some new retail space in 2018 and added shelving and fixtures to this leased space. Based on your review of invoices, the previous accountant capitalized the cost of fixtures but did not capitalize the shipping and installation costs of $2,815. These costs were expensed and recorded as a miscellaneous selling expense. Czar has decided to use double declining balance (DDB) depreciation for this item and to take a full year of depreciation in the year of acquisition. The leasehold improvements have a useful life of 15 years with a salvage value of $12,000.

R- Czar uses the FIFO Inventory Method in valuing inventory. The inventory balance of $340,000 was based on a physical count at 12/31/2018. Based on your analysis, you have noted that $10,000 of marketing games that belonged to Pellston Inc. was included in the account. You also note that $5,600 of goods shipped to Czar f.o.b. destination were in transit on December 31, 2018 and included in the physical count.

Czar Incorporated
End of Period Worksheet
For the Year Ended December 31, 2018
Unadjusted Adjusted
Account Title Trial Balance Adjustments Trial Balance
DR CR DR CR DR CR
Cash 264,000 -
Accounts Receivable 555,984 -
Allowance for Doubtful Accounts - 13,600
Interest Receivable - -
Merchandise Inventory 340,000 -
Prepaid Insurance - -
LIFO Reserve - 25,600
Prepaid Advertising - -
Prepaid Rent 13,600 -
Office Supplies 4,800 -
Note Receivable 20,000
Available for Sale Securities 300,000 -
Office Building 3,000,000 -
Accumulated Depreciation - Office Building - 70,000
Storage Building 1,020,000 -
Accumulated Depreciation - Storage Building - -
Land 600,000 -
Leasehold Improvements 180,000 -
Accumulated Depreciation - Leasehold Improvements - -
Office Equipment 260,000 -
Accumulated Depreciation - Office Equipment - 52,000
Patent 120,000 -
Accounts Payable - 276,000
Sales Tax Payable - -
Salaries Payable - 113,600
Payroll Taxes Payable - 20,000
Interest Payable - -
Income Tax Payable - -
Unearned Rent Revenue - -
Loan Payable - First Trust - 520,000
Loan Payable - Coldwell Bank - 1,600,000
Common Stock - 520,000
Additional Paid in Capital - 1,599,000
Retained Earnings - 736,000
Accumulated Other Comprehensive Income - 20,000
Dividends 67,800 -
Sales - 3,622,560
Sales Returns and Allowances 33,800 -
Sales Discounts 15,400 -
Cost of Goods Sold 1,583,600 -
Sales Salaries Expense 349,120 -
Office Salaries Expense 219,200 -
Advertising Expense 12,800 -
Depreciation Expense - Office Building -
Depreciation Expense - Leasehold Improvements - -
Depreciation Expense - Office Equipment - -
Leasing Expense - Stores 105,600 -
Miscellaneous Selling Expense 18400 -
Research & Development Expense 12,000
Rent Expense - Storage Facility - -
Insurance Expense 12,000 -
Office Supplies Expense 28,000 -
Miscellaneous Administrative Expense 7,336 -
Rent Revenue - 60,000
Interest Revenue on Note Receivable - -
Dividend Revenue on AFS Securities - 20,000
Interest Expense - -
Bad Debt Expense 28,000 -
Amortization Expense - -
Income Tax Expense - -
Payroll Taxes Expense 96,920 -
Rebate Expense - -
Unrealized holding loss - -
Depreciation Expense-Storage Building - -
Loss on Impairment - -
Rebate Liability - -
Restricted Cash for Future Expansion - -
9,268,360 9,268,360

6. On June 28 Lexicon Corporation acquired 100% of the common stock of Gulf & Eastern. The purchase price allocation included the following items: $5.7 million, patent; $4.7 million, developed technology; $3.7 million, in-process research and development; $6.7 million, goodwill. Lexicon’s policy is to amortize intangible assets using the straight-line method, no residual value, and a five-year useful life.

What is the total amount of expenses (ignoring taxes) that would appear in Lexicon’s income statement for the year ended December 31 related to these items? (Enter your answers in whole dollars.)

Cost Select Amortization expense in current (partial) year
Patent $5,700,000 ? ?
Developed technology 4,700,000 ? ?
In-process research and development 3,700,000 ? ?
Goodwill 6,700,000 ? ?
Total amortization expense - current year ?

7. On January 2, 2018, the Jackson Company purchased equipment to be used in its manufacturing process. The equipment has an estimated life of eight years and an estimated residual value of $56,625. The expenditures made to acquire the asset were as follows:

Purchase price $ 242,000
Freight charges 8,400
Installation charges 12,000


Jackson’s policy is to use the double-declining-balance (DDB) method of depreciation in the early years of the equipment’s life and then switch to straight line halfway through the equipment’s life.

Required:

1. Calculate depreciation for each year of the asset’s eight-year life.

Depreciation for the Period End of Period
Year Beginning of Period Book Value Depreciation Rate Annual Depreciation Accumulated Depreciation Book Value
2018 ? ? % ? ? ?
2019 ? ? % ? ? ?
2020 ? ? % ?
2021 ? ? % ?
2022 ? ?
2023 ?
2024 ?
2025 ?
Total

8. In 2018, internal auditors discovered that PKE Displays, Inc., had debited an expense account for the $369,000 cost of equipment purchased on January 1, 2015. The equipment’s life was expected to be five years with no residual value. Straight-line depreciation is used by PKE.


Required:
1. Prepare the correcting entry assuming the error was discovered in 2018 before the adjusting and closing entries. (Ignore income taxes.)
2. Assume the error was discovered in 2020 after the 2019 financial statements are issued. Prepare the correcting entry.

Prepare the correcting entry assuming the error was discovered in 2018 before the adjusting and closing entries. (Ignore income taxes.) (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

ADJUSTING ENTRIES: I dont know how to interpret adjusting entry questions. If anyone could just guide me in what i should do for each question and if it goes in debits or credit, I know you need all the info but just use hypothetical questions as examples to help me. This is for a project due in 2 days. Thanks! DR CR Cash 67,188 Accounts Receivable 88,704 Allowance for Doubtful Accounts 792 Interest Receivable Merchandise Inventory 168,300 Prepaid Insurance 7,128 Prepaid Rent 22,176 Supplies 30,096 Note Receivable 15,180 Store Equipment 270,864 Accumulated Depreciation - Store Equipment 29,304 Accounts Payable 126,720 Salaries & Wages Payable Interest Payable Utilities Payable Note Payable (final payment due 2018) 24,420 Common Stock 79,200 Retained Earnings 257,400 Dividends 31,680 Sales 2,557,500 Sales Returns and Allowances 15,840 Sales Discounts 34,056 Cost of Goods Sold 1,888,788 Salaries & Wages Expense 430,056 Depreciation Expense - Store Equipment Bad Debt Expense Insurance Expense Rent Expense Supplies Expense Utilities Expense 5,280 Interest Revenue Interest Expense 3,075,336 3,075,336 Net Income The following items should be considered in adjusting the accounts for financial statement preparation: 1. On February 1, 2017 a 12-month insurance policy was purchased. No expense has been recoginized for 2017. 2. Signed a one year lease for rental space on March 1, 2017. By paying for the entire year, the landlord offered a reduced rate. 3. The physical inventory count of Merchandise Inventory indicated an amount of $163,944. 4. Supplies on hand at December 31, 2017 total $1,934. 5. Store Equipment is depreciated on a straight-line basis; residual value is $10,000 with service life of 10 years. The assets were held the entire year. 6. On August 1, issued Carter Supplies a six-month note receivable at a 8.4% annual interest rate. 7. Management estimates 2.7% of its gross accounts receivable to be uncollectible. 8. On September 1, 2017 borrowed funds. The note bears 6.8 % annual interest. 9. Salaries & Wages of $6,470 are accrued and unpaid at December 31, 2017. 10. Accrued utilities totaled $752.