could you help me with the adjustments please adjustments cost of supplies used
ID: 2464261 • Letter: C
Question
could you help me with the adjustments please
adjustments
cost of supplies used 5000
dep face value 225000 residual value 20000 useful life 5 years
note recivable made on june 1 2014 5% for one year
notes payable made on april 1 2014 10% for one year
calculate bad debts for 3% of accounts recivable
unearned revenue 20000
salaries expense 40000
rent expense 15000
this is the trial balance:
New Art Agency
Trial Balance
June 30, 2014
Debit
Credit
Cash
$72,200
Accounts Receivable
89,500
Allowance for Doubtful Accounts
$ 1,800
Notes Receivable
45,500
Art Supplies
35,700
Prepaid Rent
22,500
Printing Equipment
225,000
Accumulated Depreciation – Printing Equipment
67,500
Notes Payable
33,800
Accounts Payable
25,500
Unearned Advertising Revenue
35,800
Share Capital – Ordinary
214,000
Retained Earnings
32,500
Dividends
9,200
Advertising Revenue
224,750
Salaries Expense
86,300
Utilities Expense
17,600
Insurance Expense
13,750
Miscellaneous Expense
18,400
$635,650
$635,650
New Art Agency
Trial Balance
June 30, 2014
Debit
Credit
Cash
$72,200
Accounts Receivable
89,500
Allowance for Doubtful Accounts
$ 1,800
Notes Receivable
45,500
Art Supplies
35,700
Prepaid Rent
22,500
Printing Equipment
225,000
Accumulated Depreciation – Printing Equipment
67,500
Notes Payable
33,800
Accounts Payable
25,500
Unearned Advertising Revenue
35,800
Share Capital – Ordinary
214,000
Retained Earnings
32,500
Dividends
9,200
Advertising Revenue
224,750
Salaries Expense
86,300
Utilities Expense
17,600
Insurance Expense
13,750
Miscellaneous Expense
18,400
$635,650
$635,650
Explanation / Answer
Adjustment entries Cost Supplies Dr 5000 Art Supplies Cr 5000 ( To record cost of supplies for the month) Depriciation Expense Dr 20500 Accumulated Depriciation Cr 20500 ( To record depriciation expense for 6 months) Refer Note 1 Interest Accrued Dr 189.58 Interest Income Cr 189.58 ( To record accrual of interest for 1 month) Refer Note 2 Interest Expense Dr 845 Interest Accrued Cr 845 ( To record interest expense for 3 months) Refer Note 3 Bad Debts Expense Dr 865 Allowance for Doubtful Allowance Cr 865 ( To record Bad Debts) Refer Note 4 Cash or Account Receivable Dr 20000 Unearned Revenue Cr 20000 ( To record unearned revenue ) Cash to be debited if amount received in cash else accounts receivable to be debited Salaries Expense Dr 40000 Salary Payable/ Cash Cr 40000 ( To record salary expense) Cash to be credited if amount paid in cash else salary payable to be credited Rent Expense Dr 15000 Rent Payable / Cash Cr 15000 ( To record rent expense) Cash to be credited if amount paid in cash else rent payable to be credited Note 1 Calculation of depriciation Depriciation = ( Face value - Salvage Value ) / useful life =( 225000 - 20000) / 5 = 205000/5 = 41000 Since depriciation is to be calculated for 6 months ( January to June) depriciation = 41000/2 = 20500 Note 2 Interest on Note receivable = 5 % * 45500 = 2275 Interest for 1 month = 2275/12 = 189.58 Note 3 Interest on note payable = 10% * 33800 = 3380 Interest for 3 months ( April - June ) = 3380/12 * 3 = 845 Note 4 Bad debt allowance = 3% of 89500 = 2685 Allowance already provided = 1800 Hence further allowance required = ( 2685 - 1800) = 865
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