Question

1. Depreciation on the equipment for the month of January is calculated using the straight-line method. The company estimates future uncollectible accounts. The company determines $4,300 of accounts receivable on January 31 are past due, and 50% of these accounts are estimated to be uncollectible.

2. The remaining accounts receivable on January 31 are not past due, and 2% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.)

3. Accrued interest revenue on notes receivable for January.

4. Unpaid salaries at the end of January are $33,900.

5. Accrued income taxes at the end of January are $10,300.


Record the adjusting entries on January 31 for the above transactionsOn January 1, 2018, the general ledger of ACME Fireworks

Answer 1

Answer and explanation:

2)

Date                    Account title                Debit credit

Jan 31    

1                            Depreciation expense 525  

                                  Accumulated

                                  depreciation -equipment          525

2

                                 Bad debt expense         11160

               Allowance for uncollectible account               11160

3                                       interest expense 255  

                    Interest payable (51000*.06*1/12]               255

4                               Income tax expense 13100  

                                       Income tax payable              13100

5                                    Deferred revenue 3100  

                                                 sales revenue             3100

**Depreciation on equipment =[cost-residual value]/useful life

     [16000-4300]/2

      = 5850

Depreciation for one month = 5850*1/12= 487.5

**Accounts receivable at end = 46400 beginning+136000-125500-4900+134000=186000

Estimated uncollectible account at end =[12000*30%]+[(186000-12000)*.04]

          = 3600+ 6960

          = 10560

Unadjusted balance in allowance account =4300-4900=-600 debit

Bad debt expense= estimated uncollectible account at end- unadjusted balance in allowance account

           = 10560 - (-600)

            = 10560+600

                = 11160