1. Based on prior experience, GBI estimates that approximately % of the net credit sales (gross...

1. Based on prior experience, GBI estimates that approximately ½ % of the net credit sales (gross credit sales minus returns of credit sales) for the month will become bad debt. GBI writes off bad debts as they occur and recognizes bad debt expense based on anticipated bad debts as an adjusting entry each month.
2. As a control measure, physical inventories are taken on a periodic basis alternating between the raw materials inventory, finished goods inventory and trading goods inventory. Physical inventory of the trading goods inventory was taken at the end of January. It was determined that the value of the trading goods merchandise on hand was $20,710.
3. GBI counted the office supplies on hand after the close of business on the last day of the month and determined the cost of the unused office supplies to be $620.
4. Production Machinery, Equipment and Fixtures were placed in service on January 1, 2008, are expected to last 20 years with no salvage value. GBI depreciates fixed assets on a straight-line basis and those assets acquired in the first half of the month are depreciated for the entire month, while fixed assets placed in service during the last half of the month are not depreciated until the second month. Depreciation is rounded to the nearest dollar and assets are depreciated on a monthly basis (i.e. number of days in the month is not of consequence).
5.GBI used the Internet to review the monthly charges for utilities the business consumed during January. Based on the internet report, the amount to be billed by the utilities company for January usage is $1,046.
6. Liability insurance for the six month period ending on February 28 in the amount of $15,000 was paid last August on the first of the month. Liability insurance is assumed to be utilized uniformly over the six month policy period.
7. GBI needs to recognize the wages expense for the month. Since all employees are paid salaries and no changes have been made, this amount is the same as the previous month salaries. (For purposes of this assignment, ignore manufacturing and assume all labor costs will be expensed.)
Prepare Journal Entries and Adjusting Journal Entries

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Event Date Description of Event GBI wired $30,000 to renew a 6-month property insurance policy, coverage January 2 effective January 1-June 30. Employees are paid monthly on the first business day of the month for work done in the previous month. The total payroll for the previous month is January 3 s110,000. (Ignore payroll taxes for this assignment.) Accounting wrote and distributed the paychecks. A check in the amount of $14,250 was received from customer On-the-Edge Bikes in Seattle, WA for the balance due on their account. GBI paid an invoice from Go Anywhere Inc. for ordered goods that were 4 received on December 13. The amount of the invoice is $12,220 due net 30. GBI made a sale to Road Runner Bikes for $42,000 of bicycle accessories (cost of the accessories is $35,180). The goods were shipped to Road Runner Bikes immediately via Road Runner's carier. The terms of payment are 2/10 net 30 days. January GBI paid the December utility bill of S871. Expenses are usually accrued at 10 the end of the month as “Accrued Expenses". GBI's advertisement in the English language edition of Italian Cycling Joumal was published today. This ad was prepaid at the end of July for six months of advertising, August through January, (Five months of advertising have already been used.) The office manager in San Diego ordered $350 of office (operating) supplies from Staples. While on the way back from a delivery, one of the warehouse January staff picked up the Staples order and brought it to GBI's office. GBI has an account with Staples and payment terms are net 10. Operating supplies expense is figured at the end of the month determined by the amount of 11 supplies used during the month.