Based on prior experience, GBI estimates that approximately of 1% .005 of sales credited to Account 600000 for the month will become bad debt. GBI uses the Allowance Method based on sales and records bad debt expense as an adjusting entry each month. Round amount to the nearest dollar. 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 $83,792. Unadjusted general ledger has a balance of $83,905. 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 $360. General ledger before adjustment reflects $729. 4. Production Machinery, Equipment and Fixtures placed in service on January 1, 2010 at a cost of $961,000 are expected to be in use a total of 15 years with a $25,000 salvage value. The warehouse shelves purchased this January 13 costing $24,600 have a 10-year life and no salvage value. GBI depreciates fixed assets on a straightline 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, (after January 15), 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 $1,958. 6. Liability insurance for the six-month period ending on March 31 in the amount of $15,000 was paid last September at the end 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. Use expense account 700000.) 8. The $20,000 balance in Prepaid Rent at January 31 reflects the months of January and February 2019. The monthly rent expense is $10,000. Adjusting Journal Entries 1 - 8 Posting 5 (P5 AJE 1-8) Document Date: January 31, 2020 Posting Date: January 31, 2020 Reference: Posting 5 Date Event # AJE # Account Title Debit Credit 1/31/2020 1 1 741200 Bad Debt Expense X 110150 Allowance for Bad Debt X 1/31/2020 2 2 780000 Cost of Goods Sold X 200920 Trading Goods Direct Post X 1/31/2020 3 3 740000 Supplies Expense (Cst Cntr) X 200600 Supplies Inventory X 1/31/2020 4 4 741800 Depreciation Expense X 220310 Accumulated Depreation X 1/31/2020 5 5 741500 Utilities Expense (Cst Cntr) X 300800 Accrued Expense Payable X 1/31/2020 6 6 740400 Insurance Expense X 210000 Prepaid Insurance X 1/31/2020 7 7 700000 Labor Expense (Cst Cntr) X 300700 Salaries & Wages Payable X 1/31/2020 8 8 740300 Rent Expense (Cst Cntr) X 215000 Prepaid Rent X Totals Debits/Credits ( -) ( -) Note: Cst Cntr Requires a Cost Center to be entered as NAAD10XX, where XX is the last two digits of your AIS-0XX.