Kimmel, Accounting, 6e Help I Sys signment S Comprehensive Accounting Cycle Revi

Question

Kimmel, Accounting, 6e Help I Sys signment S Comprehensive Accounting Cycle Review 9-2 (Part Level Submission) Indigo Corporation prepares quarterly financial statements. The post-closing trial balance at December 31, 2016 INDIGO RATION 31, 2016 Debit Credit Cash Accounts Receivable Allowance for Doubtful Accounts Equipment $22,100 22,000 $1,200 21,000 12,000 106,000 Buildings Accumulated Depreciation-Buildings Land 12,000 20,000 12,240 Common Stock Retained Earnings 63,660 $191,100 $191,100 During the first quarter of 2017, the following transactions occurred 1. On February 1, Indigo collected fees of $8,400 in advance. The company will perform $700 of services each month from February 1, 2017, to January 31, 2018. 2. on February 1 Indigo purchased computer equipment for S11 8SO plus sales taxes of $750 $3,950 cash was paid with the rest on account. Check #45S was used. 3, on March 1, Indigo acquired a patent with a 10-year life for $12,600 cash. Check #456 was used

Explanation / Answer

INDIGO CORPORATION Adjusting entries for the quarter ending March 31, 2017 Date Account title Debit Credit 1 Bank charges 100 Cash 100 2 unearned service revenue 700 Service revenue 700 3 Bad debts expense 1094 Allowance for doubtful debts 1094 4 Depreciation expense ** 1070 Acumulated depreciation - equipment 1070 5 Depreciation expense *** 775 Accumulated depreciation - building 775 6 Amortization expense 315 Patent 315 7 Income tax expense **** 24176 Icome tax payable 24176 Allowance for doubtful debts 4% on $24,000 960 22% on balance ($28,700 - $24,000) 1034 Total allowance required 1994 Balance available in the allowance account 900 Provision to be made * 1094 Depreciation expense: Equipment Value of old equipment on hand (21,000 - 14,000) 7000 Depreciation on this (10 year life) 700 New equipment 12600 Salvage value 1500 Depreciable value 11100 Estimated life (years) 5 Annual depreciation 2220 Depreciation for Feb. and March ** 370 Total depreciation expense 1070 Building Gross value 106000 Salvage value 13000 Depreciable value 93000 Estimates life (years) 30 Annual depreciation 3100 Depreciation for the quarter *** 775 Income statement Service revenue 180700 Expenses: Other operating expenses 95500 Depreciation expense 2295 Bad debt expense 1094 Loss on sale of equipment 1020 Bank charges 100 Amortization expense 105 Total expense 100114 Net operating income 80586 Income tax (30%) **** 24176 INDIGO CORPORATION Trial balance as at March.31, 2017 Unadjusted Adjustments Adjusted Account Debit Credit Debit Credit Debit Credit Cash 77340 100 77240 Accounts receivable 28700 28700 Allowance for doubtful debts 900 1094 1994 Equipment 19600 19600 Accumulated depreciatiom - equipment 1600 1070 2670 Building 106000 106000 Accumulated depreciatiom - building 12000 775 12775 Land 20000 20000 Patent 12600 105 12495 Accounts payable 4650 4650 Unearned revenue 8400 700 7700 Income tax payable 24176 24176 Common stock 90000 90000 Retained earnins 63660 63660 Service revenue 180000 700 180700 Other operating expenses 95500 95500 Depreciation 450 1845 2295 Loss on sale of equipment 1020 1020 Bank charges 100 100 Amortization expense 105 105 Bad Debt 1094 1094 Income tax expense 24176 24176 T o t a l 361210 361210 28020 28020 388325 388325

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