Concept explainers
a.
To calculate: Reconciled ending balance of cash.
a.
Explanation of Solution
Given,
Cash balance as per bank is $15,100.
Deposit in transit is $2,450.
Outstanding checks are $1,800.
Formula to calculate ending balance of cash,
Substitute $15,100 for cash balance as per bank, $2,450 for deposit in transit and $1,800 for outstanding checks.
Thus, ending balance of cash is $15,750.
b.
To calculate: Correct ending balance of the allowance for doubtful accounts.
b.
Explanation of Solution
Given,
Required balance is $700.
Balance in Trial is $828.
Formula to calculate allowance for doubtful accounts,
Substitute $679 for bad debt, $700 for required balance and $ 828 for balance in trial.
Thus, adjustment to correct ending balance of allowance for doubtful accounts is $551.
c.
To calculate:
c.
Explanation of Solution
Given,
Original cost of truck is $32,000.
Salvage value of truck is $8,000.
Useful life of truck is 4 years.
Formula to calculate depreciation for truck,
Substitute $32,000 for original cost, $8,000 for salvage value and 4 for number of years.
Thus, depreciation for truck is $6000.
d.
To calculate: Depreciation expenses for the two items of equipment used during year 2017.
d.
Explanation of Solution
Calculated values,
Depreciation on Sprayer is $3,000 (working notes).
Depreciation on Injector is $3,100 (working notes).
Formula to calculate the depreciation on two items of equipment,
Substitute $3,000 for depreciation on Sprayer and $3,100 for depreciation on Injector.
Thus, depreciation for equipments is $6100.
Working notes:
Given,
Original cost of Sprayer is $27,000.
Expected salvage value of Sprayer is $3,000.
Useful life of Sprayer is 8 years.
Calculation of depreciation on Sprayer,
Depreciation on Sprayer is $3,000.
Given,
Original cost of Injector is $18,000.
Expected salvage value of Injector is $2,500.
Useful life of Injector is 5years.
Calculation of depreciation on Injector,
Depreciation on Injector is $3,100.
e.
To calculate: The adjusted 2017 ending balance of examination service revenue and unearned service revenue account.
e.
Explanation of Solution
Calculate unearned service revenue.
Given,
Total service revenue received is $3,840 in August 2017.
Calculated value,
Revenue earned for 2016 is $1,600 (working note).
Formula to calculate unearned service revenue,
Substitute $3,840 for total revenue received and $1,600 for revenue earned for 2016.
Calculate balance of examination service revenue.
Given,
Total service revenue for the year 2017 is $60,000.
Unearned service revenue for 2016 is $2,240
Formula to calculate examination service revenue,
Substitute $60,000 for total service revenue and $2,240 for unearned service revenue for 2016.
Thus, the unearned service revenue is $2,240 and balance of examination service revenue is $57,760.
Working notes:
Calculate service revenue for the period August to December.
Given,
Total revenue received is $3,840 on August 2017.
Company began providing the service from August.
Therefore the time period of providing the service is 5 months. (August to December)
Calculation of service revenue for the period August to December,
f.
To calculate: The adjusted 2017 ending balance of the warranty expenses and the estimated warranty liability account.
f.
Explanation of Solution
Calculate balance of warranty expense.
Given,
The examination service revenue for 2017 is $57.760.
Cost of providing warranty service is 2.5%
Formula to calculate warranty expenses,
Substitute $57,576 for examination service revenue for 2017 and 2.5% for cost of providing warranty service.
Calculate estimated warranty liability.
Given,
Estimated warranty liability in
Adjusted warranty liability is $1,444.
Formula to calculate estimated warranty liability,
Substitute $1,400 for warranty liability in trial and $ 1,444 for adjusted warranty liability.
Thus, ending balance of warranty expenses is $1,444 and estimated warranty liability is $2,844 .
g.
To calculate: Ending balance of Interest expense and interest payable account.
g.
Explanation of Solution
Note was signed on 31st December 2017. Interest on note is payable annually on 31st December 2017. So, no entry of interest expense this year.
h.
To prepare: Adjusted trial balance
h.
Explanation of Solution
Adjusted Trial balance
Particulars | Amount ($) | Particulars | Amount ($) |
Cash | 15,750 | Allowance for doubtful accounts | 700 |
Accounts receivable | 3,193 | 6,000 | |
Inventory | 11,700 | Accumulated depreciation on equipments | 18,300 |
Truck | 32,000 | Accounts Payable | 5,000 |
Omitted checks | 637 | Warranty liability | 2,844 |
Equipment | 45,000 | Outstanding checks | 1,800 |
Deposit in Transit | 2,450 | Unearned service revenue | 2,240 |
Dividend | 10,000 | Interest payable | 0 |
Cost of goods sold | 46,300 | Long term notes payable | 15,000 |
Depreciation on Truck | 6,000 | Common stock | 10,000 |
Depreciation on equipment | 6,100 | 49,700 | |
Wages | 35,000 | Service revenue | 57,760 |
Interest expense | 0 | Interest revenue | 924 |
Rent | 9,000 | Sales | 71,026 |
Bad Debt | 679 | ||
Miscellaneous | 1,226 | ||
Repairs | 8,000 | ||
Utilities | 6,800 | ||
Bank charges | 15 | ||
Warranty | 1,444 | ||
Total | 241,294 | Total | 241,294 |
Table (1)
i.
To prepare: Journal
i.
Explanation of Solution
Date | Account Title and Explanation | Post ref | Debit($) | Credit($) |
Dec 31,2017 | Cash | 1,852 | ||
Interest earned | 52 | |||
Outstanding checks | 1,800 | |||
(To record changes in cash) |
Table (2)
- Cash is an asset account. Since company has earned interest and there is one outstanding checks. So balance of cash will increase. Hence it is debited.
- Interest earned is a revenue account. Since its balance is increasing, so it is credited.
- Outstanding checks are liability of company. Since its balance is increasing it is credited.
Date | Account Title and Explanation | Post ref | Debit($) | Credit($) |
Dec 31,2017 | Deposit in transit | 2,450 | ||
Bank charges | 15 | |||
Cash | 2,465 | |||
(To record changes in cash) |
Table (3)
- Deposit in transit is an asset account. Since its balance is increasing, it is debited.
- Bank charges are expense account. Since its balance is increasing, it is debited.
- Cash is an asset account. Since companies cash has reduced because of bank charges and deposit in transit, cash account is credited.
Date | Account Title and Explanation | Post ref | Debit($) | Credit($) |
Dec 31,2017 | Allowance for doubtful account | 128 | ||
Bad debt | 679 | |||
Accounts Receivable | 807 | |||
(To record bad debt and allowance) |
Table (4)
- Allowance for doubtful account is a provision account. Since its balance is increasing, it is debited.
- Bad debt is a loss account. Since its balance is increasing, it is debited.
- Accounts receivable is an asset account. Since companies accounts receivable are reducing because of bad debt, accounts receivable is credited.
Date | Account Title and Explanation | Post ref | Debit($) | Credit($) |
Dec 31,2017 | Depreciation on truck | 6,000 | ||
Accumulated depreciation on truck | 6,000 | |||
(To record depreciation on truck) |
Table (5)
- Depreciation on truck is an expense account. Since its balance is increasing, it is debited.
- Accumulated depreciation on truck is a liability account. Since, its balance is increasing, it is credited.
Date | Account Title and Explanation | Post ref | Debit($) | Credit($) |
Dec 31,2017 | Depreciation on equipments | 6,100 | ||
Accumulated depreciation on equipments | 6,100 | |||
(To record depreciation on equipments) |
Table (6)
- Depreciation on equipments is an expense account. Since its balance is increasing, it is debited.
- Accumulated depreciation on equipments is a liability account. Since, its balance is increasing, it is credited.
Date | Account Title and Explanation | Post ref | Debit($) | Credit($) |
Dec 31,2017 | Service revenue | 2,240 | ||
Unearned service revenue | 2,240 | |||
(To record unearned service revenue) |
Table (7)
- Service revenue is a revenue account. Since its balance is decreasing, it is debited.
- Unearned service revenue is a liability account. Since, its balance is increasing, it is credited.
Date | Account Title and Explanation | Post ref | Debit($) | Credit($) |
Dec 31,2017 | Warranty expense | 1,444 | ||
Estimated warranty liability | 1,444 | |||
(To record estimated warranty liability) |
Table (8)
- Warranty expense is an expense account. Since its balance is increasing, it is debited.
- Estimated warranty liability is a liability account. Since, its balance is increasing, it is credited.
j.
To prepare: Income statement, retained earnings statement and balance sheet.
j.
Explanation of Solution
Income statement
B Company | ||
Income Statement | ||
For the year ended December 31,2017 | ||
Particulars | Amount ($) | |
Revenues and Gains | ||
Sales revenue | 71,026 | |
Interest Revenue | 924 | |
Service revenue | 57,760 | |
Total revenue | 129,710 | |
Expenses and Losses | ||
Cost of goods sold | 46,300 | |
Rent | 9,000 | |
Depreciation on Truck | 6,000 | |
Depreciation on equipments | 6,100 | |
Wages | 35,000 | |
Bad debt | 679 | |
Bank charges | 15 | |
Utilities | 6,800 | |
Repair | 8,000 | |
Miscellaneous | 1,226 | |
Warranty | 1,444 | |
Total expenses and losses | 120,564 | |
Net Income | 9,146 |
Table (9)
Retained earnings statement
B CompanyStatement of Retained earningsFor the year ended December 31,2017 | ||
Particulars | Amount ($) | |
Retained earnings at the beginning of period | 49,700 | |
Add: Net income | 9,146 | |
Less: Dividend paid | 10,000, | |
Retained earnings at the end | 48,846 |
Table (10)
Balance sheet
B Company | ||
Balance Sheet | ||
December 31,2017 | ||
Assets | Amount($) | Amount($) |
Current Assets: | ||
Cash | 15,750 | |
Accounts Receivable | 3,193 | |
Inventory | 11,700 | |
Deposit in transit | 2,450 | |
Omitted checks | 637 | |
Total Current Assets | 43,730 | |
Property, plant and equipment | ||
Equipment: | 45,000 | |
Less: Accumulated depreciation | 18,300 | 26,700 |
Truck | 32,000 | |
Less: Accumulated depreciation | 6,000 | 26,000 |
Total Assets | 86,430 | |
Liabilities and Owners' Equity | ||
Current liabilities: | ||
Warranty liability | 2,844 | |
Accounts payable | 5,000 | |
Outstanding checks | 1,800 | |
Unearned service revenue | 2,240 | |
Allowance for doubtful debts | 700 | |
Total current liabilities | 12,584 | |
Long-term liabilities: | ||
Long term notes | 15,000 | |
Total Liabilities | 27,584 | |
Owners' equity: | ||
Common stock | 10,000 | |
Retained earnings | 48,846 | |
Total Liabilities and Owners' Equity | 86,430 |
Table (11)
Want to see more full solutions like this?
Chapter 9 Solutions
FINANCIAL ACCT.FUND.(LOOSELEAF)
- From the following particulars of Al Zahra LLC for the year 2019, a. Accounts receivable on 1st Jan 2019 RO 20000. b. During the year RO 18000 was collected from the Opening Accounts receivables and the remaining was treated as uncollectable. c. Sales during the year was RO 175000 d. Amount collected from current years sales was RO 150000 e. From the year 2019 Al Zahra LLC started to use Allowance Method for writing off the un collectables. f. Allowance to be created @ 10% on closing receivables Prepare a) Account of receivables andarrow_forwardAccounts Receivable Free Company gathered the following information from its accounting records for the year ended December 31, 2019: • Net Credit Sales for the year - P680,000 • Accounts Receivable at December 31 - 92,000 • Allowance for doubtful accounts at December 31 - 1,850arrow_forwardFrom the following particulars of Al Zahra LLC for the year 2019, a. Accounts receivable on 1st Jan 2019 RO 20000. b. During the year RO 18000 was collected from the Opening Accounts receivables and the remaining was treated as uncollectable. c. Sales during the year was RO 175000 d. Amount collected from current years sales was RO 150000 e. From the year 2019 Al Zahra LLC started to use Allowance Method for writing off the un collectables. f. Allowance to be created @ 10% on closing receivablesarrow_forward
- From the following particulars of Al Zahra LLC for the year 2019, a. Accounts receivable on 1st Jan 2019 RO 20000. b. During the year RO 18000 was collected from the Opening Accounts receivables and the remaining was treated as uncollectable. c. Sales during the year was RO 175000 d. Amount collected from current years sales was RO 150000 e. From the year 2019 Al Zahra LLC started to use Allowance Method for writing off the un collectables. f. Allowance to be created @ 10% on closing receivables Prepare a) Account of receivables and b) Allowance for Doubtful debts from the above informationarrow_forwardAyayai Inc. had the following long-term receivable account balances at December 31, 2019. Note receivable from sale of division Note receivable from officer 1. Transactions during 2020 and other information relating to Ayayai's long-term receivables were as follows. 2. 3. $1,800,000 4. 414,300 The $1,800,000 note receivable is dated May 1, 2019, bears interest at 10%, and represents the balance of the consideration received from the sale of Ayayai's electronics division to New York Company. Principal payments of $600,000 plus appropriate interest are due on May 1, 2020, 2021, and 2022. The first principal and interest payment was made on May 1, 2020. Collection of the note installments is reasonably assured. The $414,300 note receivable is dated December 31, 2019, bears interest at 9%, and is due on December 31, 2022. The note is due from Sean May, president of Ayayai Inc. and is collateralized by 10,358 shares of Ayayai's common stock. Interest is payable annually on December 31, and…arrow_forwardAce Company uses the Aging of receivables method to account for uncollectible accounts. The company had the following balances on January 01, 2019. Part A Accounts receivable.. .$2,800,000 Allowance for uncollectible accounts... . .$88,800 (credit) The company completed the following transactions during 2019. • April 20- Wrote off the balance of $1,000 from Shari Wickham's account as uncollectible. • November 27 Re-instated the account of Louis Benn and recorded the collection of $1,500 as payment in full for her account which had been written off earlier. • December 31st- i. Recorded the uncollectible account expense based on the aging schedule. The schedule showed that $124,500 of accounts receivable was estimated as uncollectible. ii. Made the closing entry for the uncollectible expense account. Requirements: 1. Prepare journal entries for each transaction (No narrations required) 2. Prepare the Allowance for Uncollectible and the Accounts Receivable accounts based on the…arrow_forward
- 31. Vigan Corporation included the following in its notes receivable as at December 31, 2021: Note receivable from sale of land P 880,000 1,200,000 Note receivable from consultation Note receivable from sale of equipment 1,600,000 In connection with your audit, you were able to gather the following transactions during 2021 and other information pertaining to the company's notes receivable: a. On January 1, 2021, Vigan Corporation sold a tract of land. The land was purchased 10 years ago was carried on Vigan's Corporation's books at a value of P 500,000. Vigan received a noninterest bearing note for P 880,000. The note is due on December 31, 2022. There is no readily available market value for the land but the current market rate of interest for comparable notes is 10%. b. On January 1, 2021, Vigan Corporation finished consultation services and accepted in exchange of a promissory note with a face value of P 1,200,000, a due date of December 31, 2023 and a stated rate of 5% with…arrow_forward5. Guernsey Company began operations on January 1, 2021. On December 31, 2021, the entity provided doubtful accounts based on 1% of annual credit sales. On January 1, 2022, the entity changed the method of determining the allowance for doubtful accounts by aging of accounts receivable. Days past invoice date Percent uncollectible 0 - 30 31 90 91 - 180 Over 180 1 5 20 80 In addition, the entity wrote off all accounts receivable that were over 1 year old. The entity provided the following additional information: 0 - 30 31 - 90 91 - 180 Over 180 Credit sales Collections, including recovery Accounts written off Recovery of accounts previously written off Days past invoice date at December 31 2022 2021 3,000,000 2,800,000 2,915,000 2,400,000 27,000 7,000 300,000 80,000 60,000 25,000 None None 250,000 90,000 45,000 15,000 a. What is the allowance for doubtful accounts on December 31, 2021? b. What is the allowance for doubtful accounts on December 31, 2022? c. What amount should be reported…arrow_forwardRecord the following transactions for Concord Co. in the general journal. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.) 2020 May 1 Received a $33,000, 12 months, 10% note in exchange for Mark Chamber’s outstanding accounts receivable. Dec. 31 Accrued interest on the Chamber note. Dec. 31 Closed the interest revenue account. 2021 May 1 Received principal plus interest on the Chamber note. (No interest has been accrued in 2021.) Date Account Titles and Explanation Debit Credit May 1, 2020Dec. 31, 2020May 1, 2021 May 1, 2020Dec. 31, 2020May 1, 2021 (To record accrued interest on note.) May 1, 2020Dec. 31, 2020May 1, 2021 (To close the…arrow_forward
- On December 31, 2020, Extreme Fitness has adjusted balances of $960,000 in Accounts Receivable and $87,000 in Allowance for Doubtful Accounts. On January 2, 2021, the company learns that certain customer accounts are not collectible, so management authorizes a write-off of these accounts totaling $26,000. Required: a. What amount would the company report as its net accounts receivable on December 31, 2020? b.Prepare the journal entry to write off the accounts on January 2, 2021. c-1. Assuming no other transactions occurred between December 31, 2020, and January 3, 2021, what amount would the company report as its net accounts receivable on January 3, 2021? c-2. Has net accounts receivable changed from December 31, 2020?arrow_forwardInferring Accounts Receivable Amounts At the end of 2019, Karras Inc. had a debit balance of 141,120 in its accounts receivable. Additionally, Karras had a credit balance in its allowance for doubtful accounts of 4,350 and 9,420 at the beginning and end of the year, respectively. During the year, Karras made credit sales of 1,530,000, collected receivables in the amount of 1,445,700, and recorded bad debt expense of 83, 750. Required: Next Level Compute the amount of accounts receivable that Karras wrote off during the year and the amount of accounts receivable at the beginning of the year.arrow_forwardStarlight Enterprises has net credit sales for 2019 in the amount of $2,600,325, beginning accounts receivable balance of $844,260, and an ending accounts receivable balance of $604,930. Compute the accounts receivable turnover ratio and the number of days sales in receivables ratio for 2019 (round answers to two decimal places). What do the outcomes tell a potential investor about Starlight Enterprises if the industry average is 1.5 times and the number of days sales ratio is 175 days?arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
- Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage