At the end of the current year, Accounts Receivable has a balance of $3,460,000, Allowance for Doubtful Accounts has a debit balance of $12,500

At the end of the current year, Accounts Receivable has a balance of $3,460,000, Allowance for Doubtful Accounts has a debit balance of $12,500, and sales for the year total $46,300,000. Bad debt expense is estimated at 1⁄2 of 1% of sales.

Determine (a) the amount of the adjusting entry for uncollectible accounts; (b) the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense; and (c) the net realizable value of accounts receivable.

Answer:

a. $231,500 ($46,300,000 × 0.0050) b. Accounts Receivable......................................................  Allowance for Doubtful Accounts ($231,500 – $12,500)...... Bad Debt Expense......................................................... c. Net realizable value ($3,460,000 – $219,000)....................... $3,241,000

Hahn Flooring Company’s perpetual inventory records indicate that $1,333,150 of merchandise should be on hand

Hahn Flooring Company’s perpetual inventory records indicate that $1,333,150 of merchandise should be on hand on December 31, 2019. The physical inventory indicates that $1,309,900 of merchandise is actually on hand. Journalize the adjusting entry for the inventory shrinkage for Hahn Flooring Company for the year ended December 31, 2019. 

Assume that the inventory shrinkage is a normal amount.

Answer:

Dec. 31 

Cost of Merchandise Sold 23,250

        Merchandise Inventory 23,250

         Inventory shrinkage.

         ($1,333,150 – $1,309,900)

The estimated amount of depreciation on equipment for the current year is $7,700. Journalize the adjusting entry

The estimated amount of depreciation on equipment for the current year is $7,700. 

Journalize the adjusting entry (include an explanation) to record the depreciation.

Answer:

Depreciation Expense 7,700

                  Accumulated Depreciation—Equipment 7,700

                   Depreciation on equipment.

The balance in the supplies account, before adjustment at the end of the year, is $4,850. Journalize the adjusting entry required if the amount of supplies on hand at the end of the year is $880.

The balance in the supplies account, before adjustment at the end of the year, is $4,850. Journalize the adjusting entry required if the amount of supplies on hand at the end of the year is $880.


Answers:

Supplies Expense3,970
Supplies3,970
Supplies used ($4,850 – $880).

At the end of January, the first month of the business year, the usual adjusting entry transferring rent earned from the unearned rent account to a revenue account

At the end of January, the first month of the business year, the usual adjusting entry transferring rent earned from the unearned rent account to a revenue account was omitted. Indicate which items will be incorrectly stated, because of the error, on (a) the income statement for January and (b) the balance sheet as of January 31. Also indicate whether the items in error will be overstated or understated.

Answers:

a. Rent revenue (or revenues) will be understated. Net income will be understated.

b. Unearned rent (liabilities) will be overstated. Owner’s equity (owner’s capital account) at the end of the period will be understated. 

The balance in the unearned fees account, before adjustment at the end of the year, is $18,000. Journalize the adjusting entry required if the amount of unearned fees at the end of the year is $3,600.

The balance in the unearned fees account, before adjustment at the end of the year, is $18,000. Journalize the adjusting entry required if the amount of unearned fees at the end of the year is $3,600.


Answers:

Unearned Fees14,400
Fees Earned14,400
Fees earned ($18,000 – $3,600).

The adjusting entry for accrued fees was omitted at the end of the current year. Indicate which items will be in error, because of the omission

The adjusting entry for accrued fees was omitted at the end of the current year. Indicate which items will be in error, because of the omission, on (a) the income statement for the current year and (b) the balance sheet at the end of the year. Also indicate whether the items in error will be overstated or understated.

Answers:

a. Fees earned (or revenues) will be understated. Net income will be understated.

b. Accounts receivable (or assets) will be understated. Owner’s equity (owner’s capital account) will be understated.