Question
JRM Co. is in the process of closing its books for the year ended December 31, year 2. The following business events are not properly
JRM Co. is in the process of closing its books for the year ended December 31, year 2.
The following business events are not properly reflected in JRMs December 31, year 2, unadjusted trial balance:
The controller determined that half of the recorded rent expense is attributed to year 3.
JRM depreciates its property, plant and equipment using the straight-line method over 10 years. The property, plant and equipment had an original cost of $20,000 and a salvage value of $5,000.
JRM uses the percentage-of-sales method to determine the addition to bad debt expense. Uncollectible accounts receivable for year 2 was estimated to be 0.25%.
On December 31, year 2, a customer declared bankruptcy and its account receivable of $855 is uncollectible.
Life insurance premium for the period ended December 31, year 2, of $650 for key members of management are included in prepaid expense.
Interest of $300 was earned and outstanding on notes receivable during year 2. The note receivable is due at the end of year 5.
Income taxes for year 2 are estimated to be $3,000.
Based on the business events above, calculate the adjustments necessary to JRMs unadjusted trial balance by entering the appropriate debit and credit amounts in columns D and E, respectively. Enter debit adjustments as positive values and credit adjustments as negative values. If there is no adjustment needed, enter zero as the adjustment. The amounts in column F will automatically calculate.
| A | B | C | D | E | F |
---|---|---|---|---|---|---|
1 | Amount name | Trial balance debit | Trial balance (credit) | Adjustment debit | Adjustment (credit) | Adjusted Trial balance debit/(credit) balance |
2 | Cash | 1,000 | 0 | 1,000 | ||
3 | Interest receivable | 0 | 0 | 0 | ||
4 | Accounts receivable | 25,000 | 0 | 25,000 | ||
5 | Allowance for doubtful accounts | 0 | -2,500 | -2,500 | ||
6 | Prepaid expenses | 1,000 | 0 | 1,000 | ||
7 | Property, plant and equipment | 20,000 | 0 | 20,000 | ||
8 | Accumulated depreciation - property, plant and equipment | 0 | -10,000 | -10,000 | ||
9 | Notes receivable | 20,000 | 0 | 20,000 | ||
10 | Accounts payable | 0 | -33,000 | -33,000 | ||
11 | Taxes payable | 0 | -1,000 | -1,000 | ||
12 | Equity | 0 | -1,500 | -1,500 | ||
13 | Sales | 0 | -300,000 | -300,000 | ||
14 | Cost of goods sold | 195,000 | 0 | 195,000 | ||
15 | Salaries, office, and general expenses | 75,000 | 0 | 75,000 | ||
16 | Rent expense | 10,000 | 0 | 10,000 | ||
17 | Tax expense | 1,000 | 0 | 1,000 | ||
18 | Bad debt expense | 0 | 0 | 0 | ||
19 | Depreciation expense | 0 | 0 | 0 | ||
20 | Insurance expense | 0 | 0 | 0 | ||
21 | Interest income | 0 | 0 | 0 | ||
22 | 348000 | -348000 | 0 | 0 | 0 |
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