Comprehensive Problem Bug-Off Exterminators

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, 2019.

December 31, 2019Unadjusted

Trial BalanceCash$17,200Accounts receivable4,100Allowance for doubtful accounts$830Merchandise inventory11,500Trucks33,000Accum. depreciationTrucks0Equipment46,000Accum. depreciationEquipment13,000Accounts payable5,050Estimated warranty liability1,450Unearned services revenue0Interest payable0Long-term notes payable15,500D. Buggs, Capital61,600D. Buggs, Withdrawals11,000Extermination services revenue61,350Interest revenue874Sales (of merchandise)72,476Cost of goods sold46,600Depreciation expenseTrucks0Depreciation expenseEquipment0Wages expense36,000Interest expense0Rent expense10,000Bad debts expense0Miscellaneous expense1,230Repairs expense8,500Utilities expense7,000Warranty expense0Totals$232,130$232,130

The following information inathroughhapplies to the company at the end of the current year.

1. The bank reconciliation as of December 31, 2019, includes the following facts.

Cash balance per bank$15,200Cash balance per books17,200Outstanding checks1,850Deposit in transit2,500Interest earned (on bank account)54Bank 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.)

1. An examination of customers' accounts shows that accounts totaling $680 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 $705.
2. A truck is purchased and placed in service on January 1, 2019. Its cost is being depreciated with the straight-line method using the following facts and estimates.

Original cost$32,500Expected salvage value$8,400Useful life (years)4

1. Two items of equipment (a sprayer and an injector) were purchased and put into service in early January 2017. They are being depreciated with the straight-line method using these facts and estimates.

SprayerInjectorOriginal cost$27,800$18,200Expected salvage value$3,000$2,600Useful life (years)85

1. On September 1, 2019, the company is paid $3,900 cash in advance to provide monthly service for an apartment complex for one year. The company began providing the services in September. When the cash was received, the full amount was credited to the Extermination Services Revenue account.
2. The company offers a warranty for the services it sells. The expected cost of providing warranty service is 4% of the extermination services revenue of $58,750 for 2019. No warranty expense has been recorded for 2019. All costs of servicing warranties in 2019 were properly debited to the Estimated Warranty Liability account.
3. The $15,500 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, 2019.
4. The ending inventory of merchandise is counted and determined to have a cost of $11,500. Bug-Off uses a perpetual inventory system.

Required:

1.Determine amounts for the following items:

1. Correct (reconciled) ending balance of Cash; and the amount of the omitted check.
2. Adjustment needed to obtain the correct ending balance of the Allowance for Doubtful Accounts.
3. Depreciation expense for the truck used during year 2019.
4. Depreciation expense for the two items of equipment used during year 2019.
5. The adjusted 2019 ending balances of the Extermination Services Revenue and Unearned Services Revenue accounts.
6. The adjusted 2019 ending balances of the accounts for Warranty Expense and Estimated Warranty Liability.
7. The adjusted 2019 ending balances of the accounts for Interest Expense and Interest Payable.

2.Use the results of part 1 to complete the six-column table by first entering the appropriate adjustments for itemsathroughgand then completing the adjusted trial balance columns.Hint:Itembrequires two adjustments.

3.Prepare journal entries to record the adjustments entered on the six-column table. Assume Bug-Off's adjusted balance for Merchandise Inventory matches the year-end physical count.

4a.Prepare single-step income statement for year 2019.

4b.Prepare statement of owner's equity (cash withdrawals during 2019 were $11,000) for year 2019 and there were no investments by the owner in the current year.

4c.Prepare classified balance sheet as at 2019.