selected transactions completed by hirata company during its first fiscal year endin 644181

Selected transactions completed by Hirata Company during its first fiscal year ending December 31 were as follows:

Jan. 2.	Issued a check to establish a petty cash fund of $1,400.
Mar. 1.	Replenished the petty cash fund, based on the following summary of petty cash
	receipts: office supplies, $678; miscellaneous selling expense, $389; miscellaneous
	administrative expense, $245.
Apr. 5.	Purchased $12,000 of merchandise on account, terms 1/10, n/30. The perpetual
	inventory system is used to account for inventory.
May 5.	Paid the invoice of April 5 after the discount period had passed.
10	Received cash from daily cash sales for $7,755. The amount indicated by the
	cash register was $7,775.
June 2.	Received a 60 day, 8.4% note for $60,000 on the Stevens account.
Aug. 1.	Received amount owed on June 2 note, plus interest at the maturity date.
3	Received $2,300 on the Jacobs account and wrote off the remainder owed on a
	$2,500 accounts receivable balance. (The allowance method is used in accounting
	for uncollectible receivables.)
28	Reinstated the Jacobs account written off on August 3 and received $200 cash in
	full payment.
Sept.	Purchased land by issuing a $250,000, 90 day note to Ace Development Co.,
	which discounted it at 8%.
Oct. 2.	Sold office equipment in exchange for $55,000 cash plus receipt of a $25,000,
	120 day, 6% note. The equipment had cost $96,000 and had accumulated depreciation
	of $10,000 as of October 1.
Nov. 30	Journalized the monthly payroll for November, based on the following data:

Salaries		Deductions
Sales salaries	$58,200	Income tax withheld	$15,804
Office salaries	29,600	Social security tax
	$87,800	withheld	5,120
		Medicare tax withheld	1,317

Unemployment tax rates:
State unemployment	3.8%
Federal unemployment	0.8%
Amount subject to unemployment taxes:
State unemployment	$2,000
Federal unemployment	2,000

Nov. 30.	Journalized the employer’s payroll taxes on the payroll.
Dec. 1.	Journalized the payment of the September 2 note at maturity.
30	The pension cost for the year was $65,000, of which $57,450 was paid to the
	pension plan trustee.

Instructions

1. Journalize the selected transactions.

2. Based on the following data, prepare a bank reconciliation for December of the current year:

a.	Balance according to the bank statement at December 31, $123,200.
b.	Balance according to the ledger at December 31, $108,680.
c.	Checks outstanding at December 31, $27,450.
d.	Deposit in transit, not recorded by bank, $12,450.
e.	Bank debit memorandum for service charges, $280.
f.	A check for $330 in payment of an invoice was incorrectly recorded in the accounts
	as $130.

3. Based on the bank reconciliation prepared in (2), journalize the entry or entries to be made by Hirata Company.

4. Based on the following selected data, journalize the adjusting entries as of December 31 of the current year:

a	Estimated uncollectible accounts at December 31, $6,490, based on an aging of accounts
	receivable. The balance of Allowance for Doubtful Accounts at December 31
	was $600 (debit).
b.	The physical inventory on December 31 indicated an inventory shrinkage of $1,320.
c.	Prepaid insurance expired during the year, $9,850.
d.	Office supplies used during the year, $1,580.
e.	Depreciation is computed as follows:

					Depreciation
		Residual	Acquisition	Useful Life	Method
Asset	Cost	Value	Date	in Years	Used
Buildings	$380,000	$ 0	January 2	50	Straight line
Office Equip.	90,000	14,000	October 2	5	Straight line
Store Equip.	45,000	10,000	January 3	8	Double declining balance
					(at twice the
					straight line rate)

f.	A patent costing $18,600 when acquired on January 2 has a remaining legal life of nine
	years and is expected to have value for six years.
g.	The cost of mineral rights was $185,000. Of the estimated deposit of 333,000 tons of
	ore, 22,500 tons were mined during the year.
h.	Vacation pay expense for December, $4,400.
i.	A product warranty was granted beginning December 1 and covering a one year
	period. The estimated cost is 2.5% of sales, which totaled $796,000 in December.
j.	Interest was accrued on the note receivable received on October 2.

5. Based on the following information and the post closing trial balance shown on the following page, prepare a balance sheet in report form at December 31 of the current year. The merchandise inventory is stated at cost by the LIFO method.

The product warranty payable is a current liability.
Vacation pay payable:
Current liability	$3,000
Long term liability	1,400
The unfunded pension liability is a long term liability.
Notes payable: Current liability	$25,000
Long term liability	75,000

	Debit	Credit
	Balances	Balances
Petty Cash	1,400
Cash	108,200
Notes Receivable	25,000
Accounts Receivable	202,300
Allowance for Doubtful Accounts		6,490
Merchandise Inventory	140,600
Interest Receivable	375
Prepaid Insurance	19,700
Office Supplies	7,100
Land	245,000
Buildings	380,000
Accumulated Depreciation—Buildings		7,600
Office Equipment	90,000
Accumulated Depreciation—Office Equipment		3,800
Store Equipment	45,000
Accumulated Depreciation—Store Equipment		11,250
Mineral Rights	185,000
Accumulated Depletion		12,500
Patents	15,500
Social Security Tax Payable		9,910
Medicare Tax Payable		2,700
Employees Federal Income Tax Payable		15,887
State Unemployment Tax Payable		42
Federal Unemployment Tax Payable		9
Salaries Payable		90,000
Accounts Payable		125,300
Interest Payable		3,000
Product Warranty Payable		19,900
Vacation Pay Payable		4,400
Unfunded Pension Liability		7,550
Notes Payable		100,000
J. Goll, Capital		1,044,837
	1,465,175	1,465,175

6. On February 7 of the following year, the merchandise inventory was destroyed by fire. Based on the following data obtained from the accounting records, estimate the cost of the merchandise destroyed:

Jan. 1 Merchandise inventory	$140,600
Jan. 1–Feb. 7 Purchases (net)	38,000
Jan. 1–Feb. 7 Sales (net)	68,000
Estimated gross profit rate	40%

selected transactions completed by hirata company during its first fiscal year endin 644181

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