Catte Corp. has the following selected information on 1 January 2021, the beginning of its fiscal year.

▪ The company uses a perpetual inventory system and average cost for its inventory, reporting the beginning inventory as follows:

400 units at a per-unit cost of $50 (purchased on 28 Nov. 2020)

300 units at a per-unit cost of $52 (purchased on 2 Dec. 2020)

300 units at a per-unit cost of $58 (purchased on 18 Dec. 2020)

▪ The information of stock on 1 Jan. 2021 is as follows.

Preferred Stock: 6% cumulative, $5 par value, 20,000 shared authorized, 5,000 shared issued and outstanding	$25,000
Additional Paid in Capital, Preferred Stock	$40,000
Common Stock: $6 par value, 30,000 shares authorized, 15,000 shares issued and outstanding	$90,000
Additional Paid in Capital, Common Stock	$30,000

▪ The account of Retained Earnings has a credit balance of $178,900.

The following transactions occurred in January 2021.

1 Jan	Sold a van purchased on 1 Jan. 2019, for $26,000 cash. The acquisition cost of the van was $53,000. The company expects to use it for a total of 160,000 km, with a residual value of $5,000. It was used in 2019 and 2020 for 33,000 km and 31,000 km respectively. The company used the units-of-production method for this van and all depreciation expense was already recorded before it was sold.
2 Jan	Issued 8,000 shares of common stock at a price of $15 per share.
5 Jan	Wrote off a $2,600 customer’s account balance, using the allowance method.
8 Jan	Sold 400 units of inventory to Magpie at a per-unit selling price of $110 on credit, terms 4/20, n/60.
10 Jan	Purchased 600 units of inventory from Fyfield at a per-unit cost of $60 on credit, terms 3/20, n/60.
11 Jan	Purchased 3,000 shares of its own common stock for $14 per share.
14 Jan	Return 200 units of inventory purchased on 10 Jan. to Fyfield.
18 Jan	Sold 700 units of inventory to Ebbes at a per-unit selling price of $120 by cash.
20 Jan	Received cash for the credit sales on 8 Jan.
22 Jan	Paid for the credit purchase on 10 Jan.
28 Jan	Sold 1,000 of its treasury shares at $10 per share.
29 Jan	Paid $23,755 of operating expenses.

2

30 Jan	Declared dividends of $10,000, to be paid in June 2021. The company did not declare dividends to stockholders in 2020.
31 Jan	Purchased a building and the machines for $174,000 and signed a promissory note for the purchase. The appraisal values are: $98,000 for the machines and $42,000 for the building. The company also paid $6,500 in legal fees to acquire the building.

Additional information for adjustments

1. The company purchased 5 computers on 1 Jan. 2020. The acquisition cost of these computers was $12,000. They were expected to be used for 4 years, with the residual value of $1,000. The company used the double-declining-balance method for these computers.

2. The company uses the Aging of Accounts Receivable method to estimate bad debts. The company has the following information of the past-due receivables amounts as at 31 Jan 2021.

Customer	Amount ($)	Due Date
Dover Inc.	10,500	20 Nov. 2020
Rye Inc.	26,200	20 Dec. 2020
Bakewell	18,500	20 Aug. 2020

Based on past experiences, a manager has estimated the rates of bad debt losses as follows:

	Number of Days Past-due
	1 - 30	31 – 60	> 60
Estimated Uncollectible %	4%	12%	25%

Before the adjustment is recorded, the Allowance for Doubtful Accounts has a $5,698 debit balance.

Instructions:

1. Prepare journal entries to record the transactions in January 2021 (51 marks).

2. Prepare adjusting entries to record the depreciation expenses and estimated bad debts on 31 January 2021 (10 marks).

3. Prepare the section of Stockholders’ Equity to be reported on Balance Sheet as at 31 January 2021 (14 marks).

Show calculation, where applicable. If not, you would get partial credit for a correct answer.

Answer rating: 100% (QA)

Propare journal entry to record transactions In January 201 Date Janl laviator J... View the full answer