BUG-OFF EXTERMINATORS
December 31, 2018
	Unadjusted Trial Balance
Cash	$	16,200
Accounts receivable		4,600
Allowance for doubtful accounts					$	823
Merchandise inventory		10,400
Trucks		31,700
Accum. depreciationTrucks						0
Equipment		58,000
Accum. depreciationEquipment						13,900
Accounts payable						5,800
Estimated warranty liability						1,200
Unearned services revenue						0
Interest payable						0
Long-term notes payable						15,700
Common stock						12,000
Retained earnings						50,000
Dividends		10,000
Extermination services revenue						58,000
Interest revenue						854
Sales (of merchandise)						74,493
Cost of goods sold		45,000
Depreciation expenseTrucks		0
Depreciation expenseEquipment		0
Wages expense		34,000
Interest expense		0
Rent expense		7,400
Bad debts expense		0
Miscellaneous expense		1,200
Repairs expense		7,400
Utilities expense		6,870
Warranty expense		0
Totals	$	232,770			$	232,770

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, 2018, includes the following facts.

Cash balance per bank	$	15,100
Cash balance per books		17,000
Outstanding checks		1,800
Deposit in transit		2,450
Interest earned (on bank account)		52
Bank service charges (miscellaneous expense)		15

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 $700.

c. A truck is purchased and placed in service on January 1, 2018. Its cost is being depreciated with the straight-line method using the following facts and estimates.

Original cost	$	32,000
Expected salvage value		8,000
Useful life (years)		4

d. Two items of equipment (a sprayer and an injector) were purchased and put into service in early January 2016. They are being depreciated with the straight-line method using these facts and estimates.

	Sprayer			Injector
Original cost	$	27,000		$	18,000
Expected salvage value		3,000			2,500
Useful life (years)		8			5

e. On August 1, 2018, the company is paid $3,840 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 2.5% of the extermination services revenue of $55,760 for 2018. No warranty expense has been recorded for 2018. All costs of servicing warranties in 2018 were properly debited to the Estimated Warranty Liability account.

g. The $15,000 long-term note is an 8%, five-year, interest-bearing note with interest payable annually on December 31. The note was signed with First National Bank on December 31, 2018.

h. The ending inventory of merchandise is counted and determined to have a cost of $11,700. Bug-Off uses a perpetual inventory system.

Required:

a.	Reconciled balance	$15,750
	Omitted check	$1,287
b.	Necessary adjustment	$1,379
c.	Depreciation expense	$6,000
d.	DepreciationSprayer	$3,000
	DepreciationInjector	$3,100
e.	Services revenue	$1,600
	Unearned services revenue	$65,760
f.	Warranty expense	$1,644
	Estimated warranty liability	$3,144
g.	Interest expense	$0
	Interest payable	$0

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