Case Study 102 ACCT
2nd semester , 1439-1440
These information presented at North Company throughout 2017:
Jan. 1 Bank of America agree to lend North Co. $41,000 and carry a 9% interest rate for one year
maturing on January 1, 2018.
Jan. 2 North Co. accepted a 4-month, 8% note from Panda Company in payment of Panda’s
$1,200 account.
Jan. 3 North Co. wrote off as uncollectible the accounts of Wooden Corporation ($450) and Zajel
Company ($280).
Jan. 11 North Co. sold for $28,000 to Fire Co. on account inventory that cost $19,600. Terms 2/10, n/30.
Jan. 15 North Co. sold inventory that cost $700 to Mark Harries for $1,000. Harries charged this
amount on his Visa Bank card. The service fee charged North Co. by the bank is 3%.
Jan. 17 Fire Co. returns merchandise worth $1000.
Jan. 24 North Co. received payment in full ($280) from Zajel Company on the account written off on
January 3.
Jan. 25 receives $22,900 payment from Fire Co.
On May 1, 2017, North Co. purchased equipment for $21,200 plus sales taxes of $1,600 (all paid in cash).
July. 1 North Co. sold for $3,500 equipment which originally cost $5,000. Accumulated depreciation on
this equipment at January 1, 2017, was $1,800; 2017 depreciation prior to the sale of the equipment was
$450.
Aug. 1 North Co. sold for $440,000 cash, inventory and collected $28,600 in sales taxes.
Sep 30, North Co. sold on account $9,000 of inventory that cost $6,300.
Nov. 30, the payroll for the month consists of salaries and wages of $60,000. All salaries and wages are
subject to 7.65% FICA taxes. A total of $8,900 federal income taxes are withheld. The salaries and wages
are paid on Jan 1, 2018.
Dec. 1 North Co. received an advanced amount of $6,000 rent for 3 months.
Adjustment data:
North Co. estimates that uncollectible accounts receivable at year-end is $3,500.
The cost of the building $150,000 is being depreciated using the straight-line method over 30 years.
The salvage value is $30,000.
The car owned this year is being depreciated using double –declining-balance method over
5 years by using 20% rate for depreciate the car. The car cost $50,000.
The equipment purchased on May 1, 2017, is being depreciated using the straight-line method over 5
years, with a salvage value of $1,800.
The patent was acquired on January 1, 2017, $9,000 and has a useful life of 10 years from that date.
The unearned rent revenue of $6,000 was received on December 1, 2017, for 3 months’ rent.
The short-term note is dated January 1, 2017, and carry a 9% interest rate.
2
The statement from Bank of America on December 31 showed a balance of $26,130 and the
cash balance per books is $26,100 . A comparison of the bank statement with the Cash account revealed the
following facts.
1. The bank collected a note receivable of $2,200 for North Company on December 15.
2. The December 31 receipts were deposited in a night deposit of $2,700 on December 31. These
deposits were recorded by the bank in January.
3. Checks outstanding on December 31 totaled $1,210.
4. On December 31, the bank statement showed an NSF charge of $680 for a check received by
the company from Zain, a customer, on account.
The following transactions occurred during December.
Purchase Units Unit Cost Sold Units
Beg. Inventory 3,000 $0.60
Dec. 3 4,000 $0.74
Dec. 5 4,400
Dec. 17 2,200 $0.80
Dec. 22 2,100
a) Prepare journal entries for each transactions and the adjusting entries .
b) Prepare double –declining-balance schedule using 20% rate for depreciate the car.
c) Prepare a bank reconciliation as of December 31, 2017.
d) Compute ending inventory and cost of goods sold using moving- average cost, assuming the Company
uses the perpetual inventory system.