ALREADY DID #1

Bug-Off Exterminators provides pest control services and sells extermination products manufactured by other companies. Following is the company's unadjusted trial balance as of December 31, 2013.

BUG-OFF EXTERMINATORS
December 31, 2013
	Unadjusted Trial Balance
Cash	$	17,600
Accounts receivable		5,200
Allowance for doubtful accounts				$	815
Merchandise inventory		13,500
Trucks		31,040
Accum. depreciationTrucks					0
Equipment		47,060
Accum. depreciationEquipment					12,700
Accounts payable					5,700
Estimated warranty liability					1,210
Unearned services revenue					0
Interest payable					0
Long-term notes payable					13,500
D. Buggs, Capital					70,089
D. Buggs, Withdrawals		10,500
Extermination services revenue					58,730
Interest revenue					864
Sales (of merchandise)					71,626
Cost of goods sold		48,200
Depreciation expenseTrucks		0
Depreciation expenseEquipment		0
Wages expense		35,100
Interest expense		0
Rent expense		9,800
Bad debts expense		0
Miscellaneous expense		1,234
Repairs expense		9,500
Utilities expense		6,500
Warranty expense		0
Totals	$	235,234		$	235,234

The following information in a through h applies to the company at the end of the current year.

a.	The bank reconciliation as of December 31, 2013, includes the following facts.

Cash balance per bank	$	13,700
Cash balance per books		17,600
Outstanding checks		1,840
Deposit in transit		2,380
Interest earned (on bank account)		41
Bank service charges (miscellaneous expense)		16

Reported on the bank statement is a canceled check that the company failed to record. (Information from the bank reconciliation allows you to determine the amount of this check, which is a payment on an account payable.)

b.	An examination of customers accounts shows that accounts totaling $679 should be written off as uncollectible. Using an aging of receivables, the company determines that the ending balance of the Allowance for Doubtful Accounts should be $707.

c.	A truck is purchased and placed in service on January 1, 2013. Its cost is being depreciated with the straight-line method using the following facts and estimates.

Original cost	$	31,040
Expected salvage value		6,800
Useful life (years)		4

d.	Two items of equipment (a sprayer and an injector) were purchased and put into service in early January 2011. They are being depreciated with the straight-line method using these facts and estimates.

		Sprayer			Injector
Original cost	$	29,160		$	17,900
Expected salvage value		3,800			1,800
Useful life (years)		8			5

e.	On August 1, 2013, the company is paid $4,920 cash in advance to provide monthly service for an apartment complex for one year. The company began providing the services in August. When the cash was received, the full amount was credited to the Extermination Services Revenue account.

f.

The company offers a warranty for the services it sells. The expected cost of providing warranty service is 1.5% of the extermination services revenue of $55,860 for 2013. No warranty expense has been recorded for 2013. All costs of servicing warranties in 2013 were properly debited to the Estimated Warranty Liability account.

g.	The $13,500 long-term note is an 7%, 5-year, interest-bearing note with interest payable annually on December 31. The note was signed with First National Bank on December 31, 2013.

h.	The ending inventory of merchandise is counted and determined to have a cost of $13,500. Bug-Off uses a perpetual inventory system.

Required:

1.	Use the preceding information to determine amounts for the following items.

a.	Correct (reconciled) ending balance of Cash, and the amount of the omitted check.
	reconcilled balance: 14,240 omitted check: 3385

b.	Adjustment needed to obtain the correct ending balance of the Allowance for Doubtful Accounts.
	necessary adjustment: 571

c.	Depreciation expense for the truck used during year 2013.
	depreciation expense: 6,060

d.	Depreciation expense for the two items of equipment used during year 2013.
	depreciation expense sprayer: 3170

depreciation expense injector: 3220

e.	The adjusted 2013 ending balances of the Extermination Services Revenue and Unearned Services Revenue accounts. (Do not round your intermediate calculations.)

f.	The adjusted 2013 ending balances of the accounts for Warranty Expense and Estimated Warranty Liability.
	ending balances after adjustment: warranty expense- 838 estimated warranty liability- 2048

g.	The adjusted 2013 ending balances of the accounts for Interest Expense and Interest Payable.
	ending balances for both: $0

2.	Use the results of part 1 to complete the six-column table by first entering the appropriate adjustments for items a through g and then completing the adjusted trial balance columns. (Hint: Item b requires two adjustments.) (Do not round your intermediate calculations.)

3.	Prepare journal entries to record the adjustments entered on the six-column table. Assume Bug-Offs adjusted balance for Merchandise Inventory matches the year-end physical count. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field. Do not round your intermediate calculations.)

4.1	Prepare a single-step income statement for year 2013.

4.2	Prepare a statement of owners equity (cash withdrawals during 2013 were $10,500) for year 2013 and there were no investments by the owner in the current year.

4.3	Prepare a Classified balance sheet as at 2013. (Negative amounts should be indicated by a minus sign. Do not round your intermediate calculations.)