Introduction

Smith Company manufactures and sells widgets to the baggers industry. The unadjusted trial balance as of December 31, 2017, is shown below. The company operates under a calendar fiscal year and uses the perpetual inventory system.

Smith Company accountants have not completed the bank reconciliation for the year ended December 31, 2017. As of that date, the statement from Bank of the South showed a balance of $19,631.00. Additional information regarding bank account activity includes the following:

1. Outstanding checks were $2,837.00;
2. Deposit recorded on the books as of December 31, 2017 of $428.00 did not clear the bank records until January 2, 2018;
3. One check in payment of insurance was correctly recorded by the bank in the amount of $487.00, but was recorded by Smith Company, and charged to Insurance Expense properly, as $478.00;
4. The bank recorded a withdrawal, previously authorized, for a loan payment in the amount of $875.00, which included interest of $186.00. Smith Company has not made any entry for this as of December 31^st;
5. The bank statement includes a charge for a NSF check in the amount of $687.00. The check has been returned by the bank and Smith Company will seek re-payment from the customer.
6. The bank recorded the service charge for the latest period of $37.00.
7. A deposit of $965.00 was recorded by the bank on December 12^th, but the deposit did not belong to Smith Company. The deposit should have been made to the account of another bank customer, Smithe Inc.

Required:

1. Prepare a bank reconciliation in good form for December 31, 2017. (4 pts)
2. Prepare any necessary adjusting entries as needed (do not combine entries). Note: These will be used below in the preparation of the financial statements. (8 pts)

In addition to the above trial balance information and the information from the bank reconciliation, the following information is used to prepare the year-end adjusting entries: (12 pts)

1. The equipment, appearing in the above trial balance, was purchased four years earlier and is being depreciation using the straight-line method over a 10-year life.
2. Wages that have not been paid as of December 31^st and should be accrued at year-end amount to $5,680.
3. The company borrowed $28,000 on September 1, 2017. The principal is due to be repaid in 8 years and interest is due to be paid twice a year, at March 1^st and September 1^st, at an annual rate of 6%.
4. When the company purchases supplies on account the supplies expense is debited. Supplies on hand at year-end are valued at $625.
5. Rent expense for the annual period ending January 31^, 2018 has been charged to rent expense.
6. An insurance policy for two years was signed on July 1, 2017, with the first installment, representing 12 months, paid at that time.

Account Debits Credits $ 17,865.00 47,520.00 42,370.00 140,000.00 $ 42.000.00 27,700.00 Cash Accounts receivable Supplies Prepaid rent Prepaid insurance Inventory Equipment Accumulated depreciation Accounts payable Wages payable Interest payable Note payable Common stock Retained earnings Sales revenue Cost of goods sold Interest expense Wage expense Rent expense Insurance expense Supplies expense Utility expense Bank charges Depreciation expense 28,000.00 65,000.00 47,500.00 374,250.00 193,540.00 87,505.00 36,000.00 7,200.00 5,185.00 7,265.00 Totals $584,450.00 $584,450.00