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