Cesar Mahusay operates an accounting firm. Shown below are selected accounts that appear in the Preliminary Trial Balance as of Dec. 31, 2018, and require adjustment. ACCOUNTS RECEIVABLE P 22,500 ALLOWANCE FOR DOUBTFUL ACCOUNTS 1,200 NOTES RECEIVABLE 20,000 OFFICE EQUIPMENT 92,000 ACCUMULATED DEPRECIATION 4,500 RENTAL INCOME 12,000 SERVICE INCOME 450,000 SUPPLIES EXPENSE 6,250 INSURANCE EXPENSE 7,200 SALARIES EXPENSE 120,000 The following adjustments are to be made: Unused office supplies at the end, P 320 One year insurance was paid on April 1 of the current year Office equipment has a useful life of 10 years with a salvage value of P 2,000. It was acquired in July 2018. Unearned rental income is 1/3 of the amount collected Service income not yet collected P 3,000 The 60 days 6% note was received on Dec.1 Estimated Bad Debts is 10 % of the Accounts Receivable Accrued salaries P 12,000. Instruction: Prepare the necessary adjusting entries to arrive at the adjusted balances for the accounts.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Instructions
Cesar Mahusay operates an accounting firm. Shown below are selected accounts that appear in the Preliminary
ACCOUNTS RECEIVABLE |
P |
22,500 |
ALLOWANCE FOR DOUBTFUL ACCOUNTS |
|
1,200 |
NOTES RECEIVABLE |
|
20,000 |
OFFICE EQUIPMENT |
|
92,000 |
|
|
4,500 |
RENTAL INCOME |
|
12,000 |
SERVICE INCOME |
|
450,000 |
SUPPLIES EXPENSE |
|
6,250 |
INSURANCE EXPENSE |
|
7,200 |
SALARIES EXPENSE |
|
120,000 |
|
|
|
The following adjustments are to be made:
- Unused office supplies at the end, P 320
- One year insurance was paid on April 1 of the current year
- Office equipment has a useful life of 10 years with a salvage value of P 2,000. It was acquired in July 2018.
- Unearned rental income is 1/3 of the amount collected
- Service income not yet collected P 3,000
- The 60 days 6% note was received on Dec.1
- Estimated
Bad Debts is 10 % of the Accounts Receivable - Accrued salaries P 12,000.
Instruction:
Prepare the necessary
Step by step
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