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, 2013.

BUG-OFF EXTERMINATORS
December 31, 2013
	Unadjusted Trial Balance
Cash	$	17,900
Accounts receivable		5,900
Allowance for doubtful accounts				$	814
Merchandise inventory		13,100
Trucks		31,620
Accum. depreciationTrucks					0
Equipment		47,770
Accum. depreciationEquipment					13,800
Accounts payable					6,500
Estimated warranty liability					1,310
Unearned services revenue					0
Interest payable					0
Long-term notes payable					14,100
D. Buggs, Capital					68,930
D. Buggs, Withdrawals		11,200
Extermination services revenue					59,690
Interest revenue					854
Sales (of merchandise)					71,526
Cost of goods sold		47,900
Depreciation expenseTrucks		0
Depreciation expenseEquipment		0
Wages expense		36,500
Interest expense		0
Rent expense		9,200
Bad debts expense		0
Miscellaneous expense		1,234
Repairs expense		8,700
Utilities expense		6,500
Warranty expense		0
Totals	$	237,524		$	237,524

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	$	13,900
Cash balance per books		17,900
Outstanding checks		1,960
Deposit in transit		2,410
Interest earned (on bank account)		35
Bank service charges (miscellaneous expense)		22

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 $670 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 $718.

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	$	31,620
Expected salvage value		7,100
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	$	30,020		$	17,750
Expected salvage value		4,900			1,600
Useful life (years)		8			5

e.	On August 1, 2013, the company is paid $4,680 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 $56,960 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 $14,100 long-term note is an 10%, 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 $13,100. 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.

b.	Adjustment needed to obtain the correct ending balance of the Allowance for Doubtful Accounts.

c.	Depreciation expense for the truck used during year 2013.

d.	Depreciation expense for the two items of equipment used during year 2013.

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.

g.	The adjusted 2013 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 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.)