Case 2 Chapters 7, 9, 10 a) In 2016 Grindstone Paving incorporated. In 2017, Gri

Question

Case 2 Chapters 7, 9, 10 a) In 2016 Grindstone Paving incorporated. In 2017, Grindstone Paving decided to expand their operations and start selling products to customers in addition to paving services. Grindstone will use the perpetual inventory method to track inventory. At the beginning of the year, the AFDA account had a credit balance of $9,000. Grindstone uses the allowance method to record bad debt. Record the selected transactions for the year. 9000 Jan 5 Purchased $50,000 of inventory on account. 50000 Feb 2 Sold inventory to a customer for $15,000 on account. The inventory had a cost of $6,000. 15000 Feb 16 Sold inventory to a customer for $5,000 on account. The inventory had a cost of $2,000. 5000 Sep 30 After repeated attempts to collect from the customer on February 16, Grindstone decides to write off the account. Dec 31 Grindstone had the following aging of accounts receivable. The only account written off during the year was on September 30. Calculate the estimated bad debt and prepare the entry. Aging Category Bad Debt % Balance Estimated Bad Debt Less than 30 days 5.0% $80,000 31 - 60 days 10.0% $40,000 61 - 90 days 30.0% $20,000 Over 90 days 60.0% $5,000 Total $145,000 Date Description DR CR b) Grindstone received their bank statement for the month of December 2017. Below is their cash ledger account and the bank statement for December. Prepare a bank reconciliation and prepare any required journal entries General Ledger Account: Cash GL No: 101 2017 Description DR CR Balance (DR or CR) Opening Balance $52,000 DR Dec 1 Deposit $5,200 $57,200 DR Dec 4 Chk #64 Office Supply Company $1,500 $55,700 DR Dec 7 Chk #61 Salary $2,500 $53,200 DR Dec 11 Chk #75 Lighting Supply $3,100 $50,100 DR Dec 12 Deposit $6,100 $56,200 DR Dec 18 Chk #67 Shelby Legal $1,250 $54,950 DR Dec 23 Chk #71 Hydro Company $620 $54,330 DR Dec 27 Chk #78 Bill's Maintenance $1,370 $52,960 DR Dec 31 Deposit $4,300 $57,260 DR HSBC Bank Prepared for: Grindstone Paving Date Information Withdrawal Deposit Balance Opening Balance $52,000 Dec 2 Deposit $5,200 $57,200 Dec 8 Chk #61 $2,500 $54,700 Dec 13 Deposit $6,100 $60,800 Dec 18 Chk #64 $300 $60,500 Dec 23 Chk #67 $1,250 $59,250 Dec 31 Service Charge $50 $59,200 Dec 31 Interest $70 $59,270 *Any check errors were cashed correctly by the bank. Grindstone Paving Bank Reconciliation Statement December 31, 2017 Explanation General Ledger Bank Date Description DR CR c) As of December 31, 2017, Grindstone Paving had the following balances. Using this information, prepare the multi-step income statement, statement of retained earnings and then the classified balance sheet. Account Title DR CR Cash 58,480 Accounts Receivable 145,000 Allowance for Doubtful Accounts 17,000 Inventory 84,000 Prepaid Insurance 1,800 Property, Plant & Equipment 145,000 Accumulated Depreciation 3,000 Accounts Payable 76,000 Unearned Revenue 8,500 Bank Loan 36,000 Common Shares 100,000 Retained Earnings 24,980 Sales Revenue 540,000 Cost of Goods Sold 243,000 Insurance Expense 4,200 Maintenance Expense 5,900 Rent Expense 36,000 Professional Fees Expense 2,600 Salaries Expense 75,000 Telephone Expense 1,100 Travel Expense 2,100 Interest Expense 500 Depreciation Expense 800 Total 805,480 805,480 The bank loan is payable over 3 years and $12,000 will be paid by December 31, 2018. $10,000 5000 3 Grindstone Paving Income Statement For the Year Ending December 31, 2017 (Example found on Page 454) Grindstone Paving Statement of Retained Earnings For the Year Ending December 31, 2017 Grindstone Paving Classified Balance Sheet As at December 31, 2017 Case 2 Chapters 7, 9, 10 a) In 2016 Grindstone Paving incorporated. In 2017, Grindstone Paving decided to expand their operations and start selling products to customers in addition to paving services. Grindstone will use the perpetual inventory method to track inventory. At the beginning of the year, the AFDA account had a credit balance of $9,000. Grindstone uses the allowance method to record bad debt. Record the selected transactions for the year. 9000 Jan 5 Purchased $50,000 of inventory on account. 50000 Feb 2 Sold inventory to a customer for $15,000 on account. The inventory had a cost of $6,000. 15000 Feb 16 Sold inventory to a customer for $5,000 on account. The inventory had a cost of $2,000. 5000 Sep 30 After repeated attempts to collect from the customer on February 16, Grindstone decides to write off the account. Dec 31 Grindstone had the following aging of accounts receivable. The only account written off during the year was on September 30. Calculate the estimated bad debt and prepare the entry. Aging Category Bad Debt % Balance Estimated Bad Debt Less than 30 days 5.0% $80,000 31 - 60 days 10.0% $40,000 61 - 90 days 30.0% $20,000 Over 90 days 60.0% $5,000 Total $145,000 Date Description DR CR b) Grindstone received their bank statement for the month of December 2017. Below is their cash ledger account and the bank statement for December. Prepare a bank reconciliation and prepare any required journal entries General Ledger Account: Cash GL No: 101 2017 Description DR CR Balance (DR or CR) Opening Balance $52,000 DR Dec 1 Deposit $5,200 $57,200 DR Dec 4 Chk #64 Office Supply Company $1,500 $55,700 DR Dec 7 Chk #61 Salary $2,500 $53,200 DR Dec 11 Chk #75 Lighting Supply $3,100 $50,100 DR Dec 12 Deposit $6,100 $56,200 DR Dec 18 Chk #67 Shelby Legal $1,250 $54,950 DR Dec 23 Chk #71 Hydro Company $620 $54,330 DR Dec 27 Chk #78 Bill's Maintenance $1,370 $52,960 DR Dec 31 Deposit $4,300 $57,260 DR HSBC Bank Prepared for: Grindstone Paving Date Information Withdrawal Deposit Balance Opening Balance $52,000 Dec 2 Deposit $5,200 $57,200 Dec 8 Chk #61 $2,500 $54,700 Dec 13 Deposit $6,100 $60,800 Dec 18 Chk #64 $300 $60,500 Dec 23 Chk #67 $1,250 $59,250 Dec 31 Service Charge $50 $59,200 Dec 31 Interest $70 $59,270 *Any check errors were cashed correctly by the bank. Grindstone Paving Bank Reconciliation Statement December 31, 2017 Explanation General Ledger Bank Date Description DR CR c) As of December 31, 2017, Grindstone Paving had the following balances. Using this information, prepare the multi-step income statement, statement of retained earnings and then the classified balance sheet. Account Title DR CR Cash 58,480 Accounts Receivable 145,000 Allowance for Doubtful Accounts 17,000 Inventory 84,000 Prepaid Insurance 1,800 Property, Plant & Equipment 145,000 Accumulated Depreciation 3,000 Accounts Payable 76,000 Unearned Revenue 8,500 Bank Loan 36,000 Common Shares 100,000 Retained Earnings 24,980 Sales Revenue 540,000 Cost of Goods Sold 243,000 Insurance Expense 4,200 Maintenance Expense 5,900 Rent Expense 36,000 Professional Fees Expense 2,600 Salaries Expense 75,000 Telephone Expense 1,100 Travel Expense 2,100 Interest Expense 500 Depreciation Expense 800 Total 805,480 805,480 The bank loan is payable over 3 years and $12,000 will be paid by December 31, 2018. $10,000 5000 3 Grindstone Paving Income Statement For the Year Ending December 31, 2017 (Example found on Page 454) Grindstone Paving Statement of Retained Earnings For the Year Ending December 31, 2017 Grindstone Paving Classified Balance Sheet As at December 31, 2017

Explanation / Answer

Question A subpart 1

The following are the journal entries to record the transaction

Subpart b

Calculation of Bad debt

Question 2 subpart 1

Bank reconciliation statement as on 31st December 2017

Subpart 2

Journal entries to record the Bank Reconciliation

As per Chegg Answering policy I've answered the 1st 4 questions including the sub parts.

Date Particulars Debit(in $) Credit (in $) 5th Jan Inventory 50,000 Account Payable 50,000 (Being Inventory purchased) 2nd Feb Accounts Receivable 15,000 Sales Revenue 15,000 (Being sales made) 2nd Feb Cost of goods sold 6,000 Inventory 6,000 Being cost recorded 16th Feb Accounts Receivable 5,000 Sales Revenue 5,000 Being sales recorded 16th Feb Cost of goods sold 2,000 Inventory 2,000 Being cost recorded 30th Sep Allowance for Doubtful Debt 5,000 Account Receivable 5,000 Being sales on 16th Feb written off 31st Dec Bad debt expense 8,000 Allowance for Doubtful Debt 8,000 Being AFDA Account adjusted

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.