Prepare the proper adjusting journal entries for the ABC Company. Assume all entries are made at year end, December 31, 2017.
ABC Co completes a printing job for a client on December 31, 2017 but has not been paid or received the $1,500 cash payment due.
A building with a cost of $450,000 a salvage value of $50,000 is purchased on January 1, 2017. The building has a 30 year life and ABC uses straight line depreciation
ABC moved into its new building on November 1, 2017. The landlord required ABC to pay 6 months’ rent in advance at $3,000 per month. At the time the bookkeeper debited rent expense and credited cash.
The ABC company pays each of its 10 employees $300 per day, the pay week being Monday through Friday with pay day being the following Tuesday. December 31st is on a Thursday.
ABC borrows $200,000 @ 8% from Citibank on June 1, 2017. No payments have yet been made to Citibank by ABC.
ABC’s balance sheet reports unearned income in the amount of $45,000 which represents $5,000 received from 9 clients. During the month ABC delivered and installed machinery for 4 of the clients.
ABC invested in a $200,000, 8% bond issued by the STU Company on March 1st 2017. No payments have been received to date from STU.
ABC reports a balance in its accounts receivable account of $2,220,000. The controller estimates that ABC will be unable to collect on 3% of the receivable based on past experience. (hint: we are trying to record estimated bad debt expense.)
The trial balance reports Sales Revenue at $760,000, Cost of Goods Sold at $230,000, Advertising expense of $80,000, selling expense of $72,000 and tax expense of $16,000. You have been asked to prepare the closing entry.
ABC has bought a 24 month insurance policy on April 1, 2017 in the amount of $4,800.
ABC has opening supply inventory of $3,200 and makes additional purchases of $12,000 during the year, debiting supply expense. End of year balance of supplies on hand is $4,800.
Expert Answer
Txn | Explanations | Debit | Credit | |
a | Accounts Receivable | 1500 | ||
Service Revenue | 1500 | |||
b | Depreciation Expense – Building | 13333.00 | ||
Accumulated Depreciation – Building | 13333 | |||
= ( Cost – Salvage ) / Life | ||||
= ( 450000 – 50000) / 30 | ||||
= 13333 | ||||
c | Prepaid rent | 12000 | ||
Rent Expense | 12000 | |||
= $3000 x 4 Months unexpired | ||||
d | Salary Expense | 12000 | ||
Salary Payable | 12000 | |||
= 10 x 300 x 4 days | ||||
e | Interest Expense | 9333 | ||
Interest Payable | 9333 | |||
= 200000 x 8% x 7/12 months | ||||
f | Unearned Income | 20000 | ||
Sale Revenue | 20000 | |||
= 5000 x 4 | ||||
g | Accrued Interest | 13333 | ||
Interest Revenue | 13333 | |||
= 200000 x 8% x 10/12 | ||||
h | Bad Debt Expense | 66600 | ||
Allowance for uncollectible accounts | 66600 | |||
= 2220000 x 3% | ||||
i | Sales revenue | 760000 | ||
Cost of Goods Sold | 230000 | |||
Advertising Expense | 80000 | |||
Selling Expense | 72000 | |||
Tax Expenses | 16000 | |||
Income Summary | 362000 | |||
j | Insurance Expense | 1800 | ||
Prepaid Insurance | 1800 | |||
= 4800 / 24 x 9 | ||||
k | Supplies Expense | 10400 | ||
Supplies | 10400 | |||
Supplies Consumed | ||||
= 3200 + 12000 – 4800 |