201 EXTRA CREDIT 3 FALL 2014 A+ SOLUTIONS

Extra Credit 3 - Due in TA mailbox Saturday December 13th at 10pm. 
GRADING: Worth up to 15 points. Read the requirements carefully.    
Partially completed problems will earn no credit—that means all requirements must be FULLY completed.
 If you complete all items as requested, you will earn at least 8 points.   
The remaining points are dependent upon the accuracy of your answers!  
     
Konkle Bells, Inc. balance sheet at 12/31/13 is presented below.  
  Three Wise Konks Company  
  Balance Sheet  
  12/31/2013  
Cash $   73,400 Accounts payable $   32,400
Merchandise Inventory      36,000 Common stock ($1 par)      10,000
Prepaid Insurance        3,600 Paid in capital in excess of par      60,000
Equipment      75,000 Retained earnings      64,600
Accumulated depreciation     (21,000)   
  $ 167,000   $ 167,000
     
During 2013, the following transactions occurred:  
     
1. Purchased $119,500 inventory on account. Three Wise Konks Company uses the perpetual method for valuing inventory.
     
2.  $180,000 in sales, plus 5.6% sales tax, were made to customers on account. Cost of the goods sold were $105,600.
     
3. Received $26,000 cash down payment for orders that will be shipped next year. 
     
4. Issued 20 year, $40,000 face value, 8% bonds on 7/2/14 at 106. The bonds pay interest every 1/1 and 7/1. 
     
5. Collected $135,200 on account.    
     
6. Paid other operating expenses of $22,600.   
     
7. Paid $117,630 on account.    
     
8. Paid $10,000 to the state for a portion of the sales tax collected from customers. 
     
9. On 1/1/14 sold equipment with an original cost of $15,000 for $5,000 cash.  The equipment's  
    accumulated depreciation is $8,500.   
     
10. Issued 1,200 shares of $125 par 8% preferred stock for $165,000 cash. 
     
11. Purchased equipment on 7/1/14 for $100,000 cash.   
     
12. Purchased 500 shares of Three Wise Konks  Inc. common stock from a disgruntled shareholder for $40 per share.
     
13. Recorded wage and payroll taxes. Employee gross wages were $30,000, FICA tax was withheld at a 7.65% rate,
     federal income taxes (FIT) of $1,800 were withheld, and state income taxes (SIT) of $600 were withheld.  
     Additionally, the Federal unemployment tax (FUTA) rate is 0.9% and the state unemployment (SUTA) rate is 3.5%.
     The net wage checks were cut and immediately given to employees. The payroll taxes are not due to be remitted until
     after year end.    
     
Requirement A:     
i - Journalize 1 - 13 above    
ii - Post to the ledger     
iii - Prepare an unadjusted trial balance which will be used as the first 2 columns of a worksheet. 
     (See Requirement B.)    
***FourOptional solution templates have been prepared to assist you. They can be accessed by clicking on 
    the tabs below. Use of Microsoft Excel is optional. Hand prepared solutions are also acceptable. 
     
     
Requirement B:     
Using the unadjusted trial balance prepared in requirement A-iii above and the following data for adjusting
entries, prepare a 10 column worksheet similar to the one in chapter 4 appendix of your text. 
(a) Straight-line depreciation, with a 10-year useful life and no salvage value is used for equipment purchased in previous years.
     For the 2014 purchase (#11 above) use double declining balance with a useful life of 10 years, and $15,000 salvage value.
(b) Accrue bond interest payable and amortize bond premium as well.  
(c) The prepaid insurance relates to a policy purchased last year that expires at a rate of $80 per month. 
(d) The company estimates that all accounts receivable are collectible--in other words, don't worry about bad debts.
     
Requirement C:     
Prepare a Statement of Cash Flows.   
Hints: In operating activities subtract gains and premium amortization.   
     
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    • Extra Credit 3 - Due in TA mailbox Saturday December 13th at 10pm.
      GRADING: Worth up to 15 points. Read the requirements carefully.
      Partially completed problems will earn …

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      Iwanted to address some concerns that have been brought up by your peers in regards to the extra credit. For accounts receivable there is no beginning balance so that …