Financial Accounting (Connect NOT Included)
Financial Accounting (Connect NOT Included)
4th Edition
ISBN: 9781259930492
Author: SPICELAND
Publisher: MCG
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Chapter 5, Problem 22E

1.

To determine

Prepare journal entries to record each transaction of Fireworks P.

1.

Expert Solution
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Explanation of Solution

1.

Prepare journal entry to record provide additional service on account for $7,000.

DateAccount titles and ExplanationDebitCredit
Accounts receivable$7,000
     Service revenue$7,000
(To record service provided on account)

Table (1)

  • Accounts receivable is a current asset, and it is increased. Therefore, debit accounts receivable account for $7,000.
  • Service revenue is a component of stockholders’ equity, and it is increased. Therefore, credit service revenue account for $7,000.

2.

Prepare journal entry to record receive cash from customers within 10 days of the services being provided on account.

DateAccount titles and ExplanationDebitCredit
Cash$4,900
Sales discount (1)$100
     Account receivable$5,000
(To record cash received on account with sales discount)

Table (2)

Working note:

Calculate sales discount.

Sales discount=Accounts receivable ×discount rate=$5,000×2%=$100

(1)

  • Cash is a current asset, and it is increased. Therefore, debit cash account for $4,900.
  • Sales discount is a contra revenue account, and it is increased. Therefore, debit sales discount account for $100.
  • Accounts receivable is a current asset, and it is decreased. Therefore, credit accounts receivable account for $5,000.

3.

Prepare journal entry to record write off customer accounts of $1,500 as uncollectible.

DateAccount titles and ExplanationDebitCredit
Allowance for uncollectible accounts$1,500
     Accounts receivable$1,500
(To record write off uncollectible accounts)

Table (3)

Allowance for uncollectible accounts is a contra asset, and it is decreased. Therefore, debit allowance for uncollectible accounts for $1,500.

Accounts receivable is a current asset, and it is decreased. Therefore, credit accounts receivable account for $1,500.

2.

To determine

Prepare adjusting entries as on December 31 of Fireworks P.

2.

Expert Solution
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Explanation of Solution

a.

Prepare adjusting entry to record uncollectible accounts.

DateAccount titles and ExplanationDebitCredit
December 31Bad debt expense$3,500
     Allowance for uncollectible accounts$3,500
(To record adjustment entry of uncollectible accounts)

Table (4)

Working notes:

Calculate ending bad debt expense.

Ending bad debt expense)=([Accounts receivable Allowance for uncollectible accounts]×Estimated percentageof bad debtsEnding balance of allowance for uncollectible accounts)=([$41,500+$7,000$5,000]$1,500)×10%($2,200$1,500)=$42,000×10%$700=$3,500

(2)

  • Bad debt expense is a component of stockholders’ equity, and it is decreased. Therefore, debit bad debts expense account for $3,500.
  • Allowance for uncollectible accounts is a contra asset, and it is increased. Therefore, credit allowance for uncollectible accounts for $3,500.

b.

Prepare adjustment entry to record interest receivable.

DateAccount titles and ExplanationDebitCredit
December 31Interest receivable$200
     Interest revenue$200
(To record adjustment entry of interest receivable)

Table (5)

  • Interest receivable is a current asset, and it is increased. Therefore, debit interest receivable account for $200.
  • Interest revenue is a component of stockholders’ equity, and it is increased. Therefore, credit interest revenue account for $200.

3.

To determine

Prepare adjusted trail balance as on 31st December 2021 of Fireworks P.

3.

Expert Solution
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Explanation of Solution

Prepare adjusted trail balance as on 31st December 2021 of Fireworks P as follows:

Fireworks' P
Adjusted Trial Balance
December 31 2021
AccountsDebit ($)Credit ($)
Cash       26,100 
Accounts Receivable       42,000 
Allowance for Uncollectible Accounts          4,200
Interest Receivable            200 
Supplies         6,700 
Notes Receivable       10,000 
Land       85,000 
Accounts Payable        12,300
Common Stock      106,000
Retained Earnings        29,900
Service Revenue      131,800
Sales Discounts            100 
Interest Revenue             200
Salaries Expense       70,900 
Utilities Expense       24,200 
Supplies Expense       15,700 
Bad Debt Expense         3,500 
Totals     284,400     284,400

Table (6)

Working notes:

Calculate ending cash balance.

Ending cash balance=Opening  balance + Entries during the year=$21,200+$4,900=$26,100

(3)

Calculate ending balance of accounts receivable.

Ending cash balance of accounts receivable) =Opening balance + Entries during the year=$41,500+($7,0005,000$1,500)=$42,000

(4)

Calculate ending balance of allowance for uncollectible accounts.

Ending balance of allowance for uncollectible accounts)=Opening balanceEntries during the year+Adjustment amount=$2,200$1,500+$3,500=$4,200

(5)

Calculate ending balance of service revenue.

Ending balance of service revenue=Opening balance + Entries during the year=$124,800+$7,000=$131,800

(6)

4.

To determine

Prepare income statement for the period ended December 31, 2021.

4.

Expert Solution
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Explanation of Solution

Prepare income statement for the period ended December 31, 2021 as follows:

Fireworks P
Income Statement
For the year ended December 31, 2021
 Amount ($)
Revenues: 
Service revenue       131,800
Sales Discounts            (100)
Interest revenue              200
Net revenues       131,900
Less: Expenses: 
Salaries Expense         70,900
Utilities Expense         24,200
Supplies Expense         15,700
Bad debt expense           3,500
Total expenses       114,300
Net income         17,600

Table (7)

5.

To determine

Prepare classified balance sheet as on December 31, 2021.

5.

Expert Solution
Check Mark

Explanation of Solution

Prepare classified balance sheet as on December 31, 2021 as follows:

Financial Accounting (Connect NOT Included), Chapter 5, Problem 22E

Figure (1)

6.

To determine

Record closing entries of Fireworks P.

6.

Expert Solution
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Explanation of Solution

Prepare closing entry of revenue accounts.

DateAccount titles and ExplanationDebitCredit
31 December 2021Service revenue$131,580
Interest revenue$200
     Sales discount$100
     Retained earnings$131,900
(To record close revenue accounts)

Table (8)

  • Service revenue is a component of stock holders’ equity and decreased it. So debit service revenue account for $131,580.
  • Interest revenue is a component of stock holders’ equity and decreased it.  So debit the interest revenue account for $200.
  • Sales discount is a contra revenue account, and it is decreased. Therefore, credit sales discount account for $100.
  • Retained earnings are a liability and increased it. So credit the retained earnings account for $131,900.

Prepare closing entry to record expense accounts.

DateAccount titles and ExplanationDebitCredit
31 December 2021Retained earnings$114,300
     Utilities expense$24,200
     Salaries expense$70,900
     Supplies expense$15,700
      Bad debt expense$3,500
(To record close expense accounts)

Table (9)

  • Retained earnings are a liability and decreased it. So debit the retained earnings.
  • Supplies expenses are an expense which is a component of stock holder’s equity and decreases it. So credit the supplies expense account.
  • Salaries expenses are an expense which is a component of stock holder’s equity and decreases it. So credit the salaries expense account.
  • Utilities expenses are an expense which is a component of stock holder’s equity and decreases it. So credit the utilities expense account.
  • Bad debt expenses are an expense which is a component of stock holder’s equity and decreases it. So credit the bad debt expense account.

7.a.

To determine

Identify the bad debts expense for the year 2021.

7.a.

Expert Solution
Check Mark

Explanation of Solution

Calculate bad debts expense.

Bad debts expense =Net income Future uncollectible accounts=$17,600$14,100=$3,500 

b.

To determine

Identify the ending balance of allowance for uncollectible accounts.

b.

Expert Solution
Check Mark

Explanation of Solution

Calculate ending balance of allowance for uncollectible accounts.

Ending balance of allowance for uncollectible accounts)=Opening balanceEntries during the year+Adjustment amount=$2,200$1,500+$3,500=$4,200

c.

To determine

Identify the expected cash collected from the customers amount.

c.

Expert Solution
Check Mark

Explanation of Solution

Calculate expected cash collected.

Expected cash collected =Accounts receivable Allowance for uncollectible accounts=$42,000$4,200=$37,800

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Chapter 5 Solutions

Financial Accounting (Connect NOT Included)

Ch. 5 - Prob. 11SSQCh. 5 - Prob. 12SSQCh. 5 - 12. On May 1, 2021, Nees Manufacturing lends...Ch. 5 - Prob. 14SSQCh. 5 - Prob. 15SSQCh. 5 - Prob. 1AECh. 5 - Prob. 2AECh. 5 - Prob. 1RQCh. 5 - Prob. 2RQCh. 5 - Prob. 3RQCh. 5 - Prob. 4RQCh. 5 - Prob. 5RQCh. 5 - Prob. 6RQCh. 5 - Prob. 7RQCh. 5 - Prob. 8RQCh. 5 - Prob. 9RQCh. 5 - Prob. 10RQCh. 5 - Prob. 11RQCh. 5 - Prob. 12RQCh. 5 - Prob. 13RQCh. 5 - Prob. 14RQCh. 5 - Prob. 15RQCh. 5 - Prob. 16RQCh. 5 - Prob. 17RQCh. 5 - Prob. 18RQCh. 5 - Prob. 19RQCh. 5 - Prob. 20RQCh. 5 - Prob. 21RQCh. 5 - Prob. 22RQCh. 5 - Prob. 23RQCh. 5 - Prob. 24RQCh. 5 - Prob. 25RQCh. 5 - Prob. 1BECh. 5 - Prob. 2BECh. 5 - Prob. 3BECh. 5 - Prob. 4BECh. 5 - Prob. 5BECh. 5 - Prob. 6BECh. 5 - Prob. 7BECh. 5 - Prob. 8BECh. 5 - Prob. 9BECh. 5 - Calculate uncollectible accounts using the aging...Ch. 5 - Calculate uncollectible accounts using the aging...Ch. 5 - Use the direct write-off method to account for...Ch. 5 - Use the direct write-off method to account for...Ch. 5 - Use the direct write-off method to account for...Ch. 5 - BE5–15 Calculate the missing amount for each of...Ch. 5 - Calculate interest revenue on notes receivable...Ch. 5 - Prob. 17BECh. 5 - Prob. 18BECh. 5 - Prob. 19BECh. 5 - Prob. 1ECh. 5 - Prob. 2ECh. 5 - Record credit sale and cash collection with a...Ch. 5 - Prob. 4ECh. 5 - Prob. 5ECh. 5 - Prob. 6ECh. 5 - Establish an allowance for uncollectible accounts...Ch. 5 - Record the adjustment for uncollectible accounts...Ch. 5 - Prob. 9ECh. 5 - Record the adjustment for uncollectible accounts...Ch. 5 - Record the adjustment for uncollectible accounts...Ch. 5 - E5–12 Consider the following transactions...Ch. 5 - Prob. 13ECh. 5 - Prob. 14ECh. 5 - Prob. 15ECh. 5 - E5-16 Refer to the information in...Ch. 5 - Record notes receivable and interest revenue...Ch. 5 - E5–18 Below are amounts (in millions) from three...Ch. 5 - Compare the percentage-of-receivables method and...Ch. 5 - Compare the percentage-of-receivables method and...Ch. 5 - Prob. 21ECh. 5 - Prob. 22ECh. 5 - Calculate the amount of revenue to recognize...Ch. 5 - Prob. 2PACh. 5 - Prob. 3PACh. 5 - Prob. 4PACh. 5 - Prob. 5PACh. 5 - Prob. 6PACh. 5 - Prob. 7PACh. 5 - Prob. 8PACh. 5 - Prob. 9PACh. 5 - Prob. 1PBCh. 5 - Prob. 2PBCh. 5 - Prob. 3PBCh. 5 - Prob. 4PBCh. 5 - Compare the direct write-off method to the...Ch. 5 - P5–6B Wanda B. Rich is the CEO of Outlet Flooring,...Ch. 5 - Prob. 7PBCh. 5 - Prob. 8PBCh. 5 - Prob. 9PBCh. 5 - Prob. 1APCh. 5 - American Eagle Outfitters, Inc. AP5–2 Financial...Ch. 5 - Prob. 3APCh. 5 - Prob. 4APCh. 5 - Prob. 5APCh. 5 - Prob. 6APCh. 5 - Prob. 7APCh. 5 - Prob. 8AP
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