Concept explainers
Identifying the impact of
Austin Acoustics recorded the following transactions during October 2016:
a. Received $2,500 cash from customer for three months of service beginning October 1, 2016, and ending December 31, 2016. The company recorded a $2,500 debit to Cash and a $2,500 credit to Unearned Revenue.
b. Employees are paid $3,000 on Monday following the five-day workweek October 31, 2016, is on Friday.
c. The company pays $440 on October 1, 2016 for its six-month auto insurance policy. The company recorded a $440 debit to Prepaid Insurance and a $440 credit to Cash.
d. The company purchased office furniture for $8,300 on January 2, 2016. The company recorded a $8,300 debit to Office Furniture and a $8,300 credit to Accounts Payable. Annual
e. The company began October with $50 of office supplies on hand. On October 10, the company purchased office supplies on account of$100. The company recorded a $100 debit to Office Supplies and a $100 credit to Accounts Payable. The company used $120 of office supplies during October.
f. The company received its electric bill on October 30 for $325 but did not pay it until November 10.
g. The company paid November’s rent of $2,500 on October 30. On October 30, the company recorded an $2,500 debit to Rent Expense and an $2,500 credit to Cash.
Indicate if an adjusting entry is needed for each item on October 31 for the month of October. Assuming the adjusting entry is not made, indicate which specific category or categories of accounts on the financial statements are misstated and if they are overstated or understated. Use the following table as a guide. Item a is completed as an example:
Want to see the full answer?
Check out a sample textbook solutionChapter 3 Solutions
MYLAB (24 MONTHS) (FIN)
- Hardys Landscape Services total revenue on account for 2018 amounted to 273,205. The company, which uses the allowance method, estimates bad debts at percent of total revenue on account. Required Journalize the following selected entries: 2012 Dec. 12Record services performed on account for E. E. Morton, 245. 31Record the adjusting entry for Bad Debts Expense. 31Record the closing entry for Bad Debts Expense. 2013 Feb. 18Write off the account of E. E. Morton as uncollectible, 245. Check Figure Adjusting entry amount, 1,366.03arrow_forwardRogan Companys total sales on account for the year amounted to 327,000. The company, which uses the allowance method, estimated bad debts at 1 percent of its credit sales. Required Journalize the following selected entries: 2017 Dec.31 Record the adjusting entry. 2018 Mar. 2Write off the account of A. M. Billson as uncollectible, 584. June 6Write off the account of W. H. Gilders as uncollectible, 492. Check Figure Adjusting entry amount, 3,270arrow_forwardAdjusting Entries Kretz Corporation prepares monthly financial statements and therefore adjusts its accounts at the end of every month. The following information is available for March 2016: Kretz Corporation takes out a 90-day, 8%, $15,000 note on March 1, 2016, with interest and principal to be paid at maturity. The asset account Office Supplies on Hand has a balance of $1,280 on March 1, 2016. During March, Kretz adds $750 to the account for purchases during the period. A count of the supplies on hand at the end of March indicates a balance of $1,370. The company purchased office equipment last year for $62,600. The equipment has an estimated useful life of six years and an estimated salvage value of $5,000. The companys plant operates seven days per week with a daily payroll of $950. Wage earners are paid every Sunday. The last day of the month is Thursday, March 31. The company rented an idle warehouse to a neighboring business on February 1, 2016, at a rate of $2,500 per month. On this date, Kretz Corporation credited Rent Collected in Advance for six months rent received in advance. On March 1, 2016, Kretz Corporation credited a liability account, Customer Deposits, for $4,800. This sum represents an amount that a customer paid in advance and that Kretz will earn evenly over a four-month period. Based on its income for the month, Kretz Corporation estimates that federal income taxes for March amount to $3,900. Required For each of the preceding situations, prepare in general journal form the appropriate adjusting entry to be recorded on March 31, 2016.arrow_forward
- At December 31, 2017, Hawke Company reports the following results for its calendar year. Cash sales Credit sales $1,738,920 2,812,000 In addition, its unadjusted trial balance includes the following items. Accounts receivable $852,036 debit 10,250 debit Allowance for doubtful accounts Problem 9-2A Part 1 Required: 1. Prepare the adjusting entry for this company to recognize bad debts under each of the following independent assumptions. a. Bad debts are estimated to be 3% of credit sales. b. Bad debts are estimated to be 2% of total sales. C. An aging analysis estimates that 6% of year-end accounts receivable are uncollectible. Adjusting entries (all dated December 31, 2017). View transaction list Journal entry worksheet 1. 2. 3 Bad debts are estimated to be 3% of credit sales.arrow_forwardOn December 31, 2017, Extreme Fitness has adjusted balances of $800,000 in Accounts Receivable and $55,000 in Allowance for Doubtful Accounts. On January 2, 2018, the company learns that certain customer accounts are not collectible, so management authorizes a write-off of these accounts totaling $10,000. What amount would the company report as its net accounts receivable on December 31, 2017? Prepare the journal entry to write off the accounts on January 2, 2018. Assuming no other transactions occurred between December 31, 2017, and January 3, 2018, what amount would the company report as its net accounts receivable on January 3, 2018? Has net accounts receivable changed from December 31, 2017?arrow_forwardDuring its first year of operation in 2014, Browne Sales Corporation made most of its sales on credit. At the end of the year, accounts receivable amounted to $199,000. On December 31, 2014, management reviewed the collectible status of the accounts receivable. Approximately $16,500 of the $199,000 of accounts receivable were estimated to be uncollectible. What adjusting entry would be made December 31, 2014?arrow_forward
- Casebolt Company wrote off the following accounts receivable as uncollectible for the first year of its operations ending December 31: Customer Amount $ 4,650 Shawn Brooke Eve Denton 5,180 Art Malloy 11,050 Cassie Yost 9,120 Total $30,000 a. Journalize the write-offs under the direct write-off method. b. Journalize the write-offs under the allowance method. Also, journalize the adjusting entry for uncollectible accounts. The company recorded $5,250,000 of credit sales during the year. Based on past history and industry averages, 4% of credit sales are expected to be uncollectible. c. How much higher (lower) would Casebolt Company's net income have been under the direct write-off method than under the allowance method?arrow_forwardDuring the year ended December 31, 2018, Kelly's Camera Shop had sales revenue of $140,000, of which $70,000 was on credit. At the start of 2018, Accounts Receivable showed a $11,000 debit balance and the Allowance for Doubtful Accounts showed a $540 credit balance. Collections of accounts receivable during 2018 amounted to $62,000. Data during 2018 follow: a. On December 10, a customer balance of $1,200 from a prior year was determined to be uncollectible, so it was written off. b. On December 31, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2 percent of credit sales for the year. Required: 1. Give the required journal entries for the two events in December. 2. Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the balance sheet and income statement for 2018. 3. On the basis of the data available, does the 2 percent rate appear to be reasonable? Complete this question by entering your answers in…arrow_forwardJohnson company’s financial year ended on December 31, 2010. All the transactions related to the company’s uncollectible accounts are can be found below: The accounts receivable account had a balance of $114,630 and the beginning balance in the allowance for uncollectible accounts was $6,200. Prepare journal entries for each transaction. Prepare the Allowance for Uncollectible and the Accounts Receivable accounts based on the information presented and balance off each account.arrow_forward
- At the end of 2016, Splish Brothers Inc. has accounts receivable of $675,100 and an allowance for doubtful accounts of $24,370. On January 24, 2017, it is learned that the company’s receivable from Madonna Inc. is not collectible and therefore management authorizes a write-off of $4,127.(a) Prepare the journal entry to record the write-offarrow_forwardIndigo Corporation had record sales in 2023. It began 2023 with an Accounts Receivable balance of $613,500 and an Allowance for Expected Credit Losses of $40,400. Indigo recognized credit sales during the year of $8,020,000 and made monthly adjusting entries equal to 0.5% of each month's credit sales to recognize the loss on impairment. Also during the year, the company wrote off $42,400 of accounts that were deemed to be uncollectible, although one customer whose $4,800 account had been written off surprised management by paying the amount in full in late September. Including this surprise receipt, $7,882,200 in cash was collected on account in 2023. To assess the reasonableness of the allowance for expected credit losses, the controller prepared the following aged listing of the receivables at December 31, 2023: Days Account Outstanding Less than 16 days Between 16 and 30 days Between 31 and 45 days Between 46 and 60 days Between 61 and 75 days Over 75 days (b) Amount $378,500…arrow_forwardJohnson company’s financial year ended on December 31, 2010. All thetransactions related to the company’s uncollectible accounts are can be found below: The accounts receivable account had a balance of $114,630 and the beginning balance in the allowance for uncollectible accounts was $6,200.Required:1. Prepare journal entries for each transaction.2. Prepare the Allowance for Uncollectible and the Accounts Receivable accounts based on the information presented and balance off each account.3. Prepare the balance sheet extract as at Dec 31 to show the net realizable value for the Accounts Receivable. 4. Assume that the aging of accounts receivable method was used by the company and that $7,050 of the accounts receivable as of December 31 were estimated to be uncollectible. You are now required to:a. Determine the amount to be charged to uncollectible expense (show your workings for the computation of this figure).b. Prepare the balance sheet extract to show the net realizable value of the…arrow_forward
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningCollege Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College Pub
- College Accounting (Book Only): A Career ApproachAccountingISBN:9781305084087Author:Cathy J. ScottPublisher:Cengage Learning