Question

RM Co. is in the process of closing its books for the year ended December 31, year 2.

The following business events are not properly reflected in JRM’s December 31, year 2, unadjusted trial balance:
The controller determined that half of the recorded rent expense is attributed to year 3.
JRM depreciates its property, plant and equipment using the straight-line method over 10 years. The property, plant and equipment had an original cost of $20,000 and a salvage value of $5,000.
JRM uses the percentage-of-sales method to determine the addition to bad debt expense. Uncollectible accounts receivable for year 2 was estimated to be 0.25%.
On December 31, year 2, a customer declared bankruptcy and its account receivable of $855 is uncollectible.
Life insurance premium for the period ended December 31, year 2, of $650 for key members of management are included in prepaid expense.
Interest of $300 was earned and outstanding on notes receivable during year 2. The note receivable is due at the end of year 5.
Income taxes for year 2 are estimated to be $3,000.
Based on the business events above, calculate the adjustments necessary to JRM’s unadjusted trial balance by entering the appropriate debit and credit amounts in columns D and E, respectively. Enter debit adjustments as positive values and credit adjustments as negative values. If there is no adjustment needed, enter zero as the adjustment.
The amounts in column F will automatically calculate.
A B C D E F

1 Amount name Trial balance debit Trial balance (credit) Adjustment debit Adjustment (credit) Adjusted Trial balance debit/(credit) balance
Cash 1,000 0 1,000
3 Interest receivable 0 0 0
4 Accounts receivable 25,000 0 25,000
5 Allowance for doubtful accounts 0 -2,500 -2,500
6 Prepaid expenses 1,000 0 1,000
7 Property, plant and equipment 20,000 0 20,000
8 Accumulated depreciation - property, plant and equipment 0 -10,000 -10,000
9 Notes receivable 20,000 0 20,000
10 Accounts payable 0 -33,000 -33,000
11 Taxes payable 0 -1,000 -1,000
12 Equity 0 -1,500 -1,500
13 Sales 0 -300,000 -300,000
14 Cost of goods sold 195,000 0 195,000
15 Salaries, office, and general expenses 75,000 0 75,000
16 Rent expense 10,000 0 10,000
17 Tax expense 1,000 0 1,000
18 Bad debt expense 0 0 0
19 Depreciation expense 0 0 0
20 Insurance expense 0 0 0
21 Interest income 0 0 0
22 348000 -348000 0 0 0

Answer 1

Account Trial Trial Adjustment Adjustment Adjustment trial balnc

name balnc balnc debit (credit) (debit/credit) balnc debit (credit)

-Cash $1000 $0 $1000

-Interest $0 $0 $300 $300

receivable

-Accounts $25000 $0 -$855 $24145

receivable

-Allowance $0 -$2500 $855 -$750 -$2395

for doubt

ful accounts

-Prepaid $1000 $0 $5000 -$650 $5350

expenses

-property $20000 $0 $20000

plant

-depreciation $0 -$10000 -$1500 -$11500

property, plant

-Notes $20000 $0 $20000

receivable

-Account $0 -$33000 -$33000

payable

-Taxes $0 -$1000 -$2000 -$3000

payable

-Equity $0 -$1500 -$1500

-Sales $0 -$300000 -$300000

-Cost of $195000 $0 $195000

goods sold

-Salaries, $75000 $0 $75000

offices,etc.

-Rent $10000 $0 -$5000 $5000

expenses

-Tax $1000 $0 $2000 $3000

expenses

-Bad debt $0 $0 $750 $750

expense

-Depreciation $0 $0 $1500 $1500

expenses

-Insurance $0 $0 $650 $650

expenses

-Interest $0 $0 -$300 -$300

expenses

Total $348000 -$348000 $11055 -$11055 $0