"A Sticky Patch: Completing the Accounting Cycle for ROYAL JELLY TRADING" ROYAL JELLY TRADING, which follows GAAP and uses the periodic inventory system, is a merchandising business that buys and sells various kinds of jelly candies. Its trial balance as of fiscal year-end September 30, 2020, before any adjustments, can be found on the next page: Information for adjusting entries are as follows: 1. Interest has accrued on the customer's P20,000 60-day 12% note dated August 21, 2020 and this remained unrecorded as of year-end. 2. Rent for the month of September amounting to P15,000 has not been received as at year-end. 3. The company pays its employees their salaries every Friday for work done Monday to Friday of that week. Weekly pay is P10,000 for office salaries and P15,000 for store salaries. September 30, 2020 falls on a Wednesday. 4. At year-end, unused office supplies were P18,000, while unused store supplies amounted to P12,000. 5. One-fourth of the Prepaid Insurance Expense balance has expired as at year-end. 6. Of the Unearned Sales, only 30% remains unearned as at year-end. 7. The company uses the straight-line method in recording depreciation. The building is expected to have a 20% scrap value and 40 years of estimated useful life; the office furniture and equipment is expected to have a 10% salvage value and useful life of 10 years; and the store furniture and equipment is expected to have a P25,000 residual value and useful life of eight years. 8. It is company policy to maintain allowance at 10% of outstanding accounts receivable. 9. Based on physical count, merchandise inventory at year-end amounted to P65,000. Account Title Credit Debit 480,000 210,000 No. 001 Cash Accounts Receivable Allowance for Doubtful Accounts 021 022 P 18,000 Notes Receivable Accrued Interest Income 023 20,000 024 025 Accrued Rent Income 72,000 60,000 24,000 26,000 1,000,000 4,000,000 Merchandise Inventory, October 1, 2019 Prepaid Insurance Expense Office Supplies Store Supplies Land Building Accumulated Depreciation – Building Office Furniture and Equipment Accumulated Depreciation – Office Furniture and Equipment Store Furniture and Equipment Accumulated Depreciation – Store Furniture and Equipment Accounts Payable Accrued Salaries Expense Unearned Sales 031 041 042 043 101 102 103 240,000 104 300,000 105 81,000 106 185,000 60,000 230,000 107 201 211 221 70,000 7,000,000 Queenie King, Capital, October 1, 2019 Queenie King, Drawing 301 302 90,000 Sales 401 402 2,100,000 Sales Returns and Allowances 80,000 40,000 403 Sales Discount 411 Rent Income 165,000 412 Interest Income Purchases Purchase Returns and Allowances 1,100,000 501 502 503 12,000 14,000 Purchase Discount Freight-in Office Salaries Expense Store Salaries Expense Utilities Expense - office Utilities Expense - store Depreciation Expense – Building Depreciation Expense – Office Furniture and Equipment Depreciation Expense – Store Furniture and Equipment Office Supplies Expense Store Supplies Expense Freight-out Insurance Expense Doubtful Accounts Expense Taxes and Licenses Expense Miscellaneous Distribution Costs Miscellaneous Administrative Expenses Income Summary TOTAL 504 511 512 36,000 510,000 765,000 240,000 290,000 513 514 515 516 517 518 519 520 521 22,000 522 523 598 400,000 23,000 17,000 599 601 P9,990,000 P9,990,000

"A Sticky Patch: Completing the Accounting Cycle for ROYAL JELLY TRADING" ROYAL JELLY TRADING, which follows GAAP and uses the periodic inventory system, is a merchandising business that buys and sells various kinds of jelly candies. Its trial balance as of fiscal year-end September 30, 2020, before any adjustments, can be found on the next page: Information for adjusting entries are as follows: 1. Interest has accrued on the customer's P20,000 60-day 12% note dated August 21, 2020 and this remained unrecorded as of year-end. 2. Rent for the month of September amounting to P15,000 has not been received as at year-end. 3. The company pays its employees their salaries every Friday for work done Monday to Friday of that week. Weekly pay is P10,000 for office salaries and P15,000 for store salaries. September 30, 2020 falls on a Wednesday. 4. At year-end, unused office supplies were P18,000, while unused store supplies amounted to P12,000. 5. One-fourth of the Prepaid Insurance Expense balance has expired as at year-end. 6. Of the Unearned Sales, only 30% remains unearned as at year-end. 7. The company uses the straight-line method in recording depreciation. The building is expected to have a 20% scrap value and 40 years of estimated useful life; the office furniture and equipment is expected to have a 10% salvage value and useful life of 10 years; and the store furniture and equipment is expected to have a P25,000 residual value and useful life of eight years. 8. It is company policy to maintain allowance at 10% of outstanding accounts receivable. 9. Based on physical count, merchandise inventory at year-end amounted to P65,000. Account Title Credit Debit 480,000 210,000 No. 001 Cash Accounts Receivable Allowance for Doubtful Accounts 021 022 P 18,000 Notes Receivable Accrued Interest Income 023 20,000 024 025 Accrued Rent Income 72,000 60,000 24,000 26,000 1,000,000 4,000,000 Merchandise Inventory, October 1, 2019 Prepaid Insurance Expense Office Supplies Store Supplies Land Building Accumulated Depreciation – Building Office Furniture and Equipment Accumulated Depreciation – Office Furniture and Equipment Store Furniture and Equipment Accumulated Depreciation – Store Furniture and Equipment Accounts Payable Accrued Salaries Expense Unearned Sales 031 041 042 043 101 102 103 240,000 104 300,000 105 81,000 106 185,000 60,000 230,000 107 201 211 221 70,000 7,000,000 Queenie King, Capital, October 1, 2019 Queenie King, Drawing 301 302 90,000 Sales 401 402 2,100,000 Sales Returns and Allowances 80,000 40,000 403 Sales Discount 411 Rent Income 165,000 412 Interest Income Purchases Purchase Returns and Allowances 1,100,000 501 502 503 12,000 14,000 Purchase Discount Freight-in Office Salaries Expense Store Salaries Expense Utilities Expense - office Utilities Expense - store Depreciation Expense – Building Depreciation Expense – Office Furniture and Equipment Depreciation Expense – Store Furniture and Equipment Office Supplies Expense Store Supplies Expense Freight-out Insurance Expense Doubtful Accounts Expense Taxes and Licenses Expense Miscellaneous Distribution Costs Miscellaneous Administrative Expenses Income Summary TOTAL 504 511 512 36,000 510,000 765,000 240,000 290,000 513 514 515 516 517 518 519 520 521 22,000 522 523 598 400,000 23,000 17,000 599 601 P9,990,000 P9,990,000

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter14: Adjustments For A Merchandising Business

Section: Chapter Questions

Problem 8RQ: A firm is preparing to make adjusting entries at the end of the accounting period. The balance of...

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