Question

Use the following information to answer the questions that follow. Some questions require additional computations. After doing the computation be sure to make the required entry. ACC 211, Inc. is a company that resells pencils for accounting students. Beginning balances are as follows:
		Cash	$     10,000.00
		Retained earnings	$     10,000.00
ACC 211
General Journal, 20**
Event		Account title	Debit	Credit
1.    Acquired $50,000 from the issue of common stock.
		Type AS/AE/AU/CE
1
2. ACC 211 won a big contract with the state to service all pencils in the department. They are required to come in each morning to sharpen each worker’s pencil. The state paid ACC 211 $350,000 cash for work completed during the year and promised to pay the balance of $350,000 in the coming year
		Type AS/AE/AU/CE
2
3. ACC 211 has noticed its accounts receivable balance is growing more than desired and some collection problems exist. It appears that uncollectible expense is approximately 3 percent of total credit sales. ACC 211 has decided that it will starting this year, adopt the allowance method of accounting for uncollectible accounts. ACC 211 uses an adjusting entry to recognize the uncollectible account expense on its credit sales to date.
		Type AS/AE/AU/CE
3
4. ACC 211 bought equipment for $6,000 on January 1st. The furniture had a 4% discount. Freight cost amounted to $1,600. ACC 211 had to hire a specialist to adjust the equipment before use. He paid the specialist $1,500. Insurance expense for the equipment was $500 annually. The equipment has a useful life of 10 years with salvage value of $500. The straight-line method was used as the method of depreciation. All of these expenses were paid in cash.
		Type AS/AE/AU/CE
5a. Record in general journal format the acquisition of the furniture
5a.
Record in general journal format the depreciation expense for the first year using straight line
5b.
5c.   Record in general journal format, any expenses not capitalized
		Type AS/AE/AU/CE
5c.

Answer 1

Journal Entries

SL	Particulars		DR	CR
1	Bank Account		50000.00
	To Common Stock A/c			50000.00

SL	Particulars		DR	CR
2	Bank Account		3,50,000.00	-
	Trade Receivables		3,50,000.00	-
	To Common Stock A/c		-	7,00,000.00

SL	Particulars		DR	CR
3	Trade Receivables		21,000.00	-
	To Provision for Trade Receivables		-	21,000.00

SL	Particulars		DR	CR
5a	Furniture Account		8,860.00	-
	To Cash Account		-	8,860.00
Note: Frieght cost and installation cost is added to Furniture since these expenses are prior to put to use of furniture

SL	Particulars		DR	CR
5b	Depreciation Account		836.00	-
	To Furniture Account		-	836.00

SL	Particulars		DR	CR
5c	Insurance Expenses Account		500.00	-
	To Cash Account		-	500.00