Question

Intelligent Toys, Inc Unadjusted Trial Balance The following information is available on 31 March 2022 for preparation of adjusting entries: (a) Electricity incurred for the month amounted to $5,600. (b) All employees worked for the whole month of March. The employees have a total salary of $27,000 for a five-day work weck. All employees work a five-day week and are paid every four weeks on the following Thursday, based on the number of days they have worked in the last four weeks. Last payment day is on 10 March 2022 (Thursday). ITI paid $108,000($27,000×4) for salary up to 9 March 2022 (Wednesday). Employees are entitled to full pay on public holidays but not on Saturday and Sunday. (c) Building is recorded at historical cost and their estimated useful lives are 25 years. No residual value is expected for the building. The building was acquired on 1 April 2020. The company uses straightline mothod for all buildings. preparation of adjusting entries: (a) Electricity incurred for the month amounted to $5,600. (b) All employees worked for the whole month of March. The employees have a total salary of $27,000 for a five-day work week. All employees work a five-day week and are paid every four weeks on the following Thursday, based on the number of days they have worked in the last four weeks. Last payment day is on 10 March 2022 (Thursday). ITI paid $108,000($27,000×4) for salary up to 9 March 2022 (Wednesday). Employees are entitled to full pay on public holidays but not on Saturday and Sunday. (c) Building is recorded at historical cost and their estimatect useful lives are 25 years. No residual value is expected for the building. The building was acquired on 1 April 2020 . The company uses straightline method for all buildings. (d) The prepaid insurance was paid in January 2022 covering a 12-month general insurance from 1 January 2022 to 31 December 2022. (e) Physical count showed that $4,200 of supplies remained on hand. (f) Allowance for bad debt is estimated based on 15% of the closing accounts receivable balance due to dramatical down turn of the economy. (g) Recognize interest expense for the month. (Information of the notes payable: On 13 March 2022, ITI purchased $150,000 inventory by signing a 90 -day, 10% notes payable.) Intelligent Toys, Ine ("ITI") is a well establish toys trading company which adopts the periodie system. ITI prepares its financial statements on a monthly basis. Required: Journalize the adjusting entries for the information (a) to (g) for the month of March at 31 March 2020. Leave the space blank if no entry is reauired. All the accounts in the chart of accounts are listed in the Unadjusted Trial Balance provided. No Explanation is required. Intelligent Toys, Ine ("ITT") is a well establish toys trading company which adopts the periodic system. ITI prepares its financial statcments on a monthly basis. Required: Joumalize the adjusting entries for the information (a) to (g) for the month of March at 31 March 2020 . Leave the space blank if no entry is required. All the accounts in the chart of accounts are listed in the Unadjusted Trial Balance provided. No Explanation is required. Please copy and paste the account names from the provided Unadjusted Trial Balance. Input numerals for amount only, no ";" or " \$ " quot; sign are needed, cg, five thousand should be input as 5000 .

Answer 1

The adjusting entries for Intelligent Toys, Inc. involve accounting for expenses such as electricity and salaries, adjusting depreciation on the building, ratifying prepaid insurance, accounting for supplies on hand, estimating allowance for bad debts, and recognizing interest expense on a notes payable.

Step-by-step explanation:

To prepare the adjusting entries for Intelligent Toys, Inc. for the month of March 2022, we'll address each of the items (a) to (g) provided:

1. Electricity: Debit Utilities Expense 5600; Credit Accounts Payable 5600
2. Salaries: Since the last payment was on 10 March and covers up to 9 March, we need to account for the salaries from 10 March to 31 March. This would be for a period of 16 working days (22 days minus 6 weekend days). Therefore, the salary expense for March would be 27,000 / (30/5) * 16 = 14400. Debit Salaries Expense 14400; Credit Salaries Payable 14400
3. Depreciation on the building: The building's annual depreciation is calculated by dividing the building's historical cost by its useful life of 25 years. Without the cost provided, we cannot calculate the exact expense. However, the journal entry would be: Debit Depreciation Expense - Building; Credit Accumulated Depreciation - Building
4. Insurance: The monthly insurance expense would be the total paid divided by 12 months. Debit Insurance Expense; Credit Prepaid Insurance
5. Supplies: This is an adjustment for the supplies used. Debit Supplies Expense; Credit Supplies
6. Allowance for Bad Debt: Without the closing accounts receivable balance, we cannot calculate the exact amount for bad debt. However, the entry would be: Debit Bad Debt Expense; Credit Allowance for Doubtful Accounts
7. Interest on Notes Payable: The monthly interest on the notes payable would be (150,000 * 0.10) / 12. Debit Interest Expense; Credit Interest Payable

These are the journal entries needed to adjust the financial records of Intelligent Toys, Inc. as of 31 March 2022.