Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting An Introduction

Authors: Pauline Weetman

7th Edition

1292086696, 978-1292086699

More Books

Students also viewed these Accounting questions

Question

Did the author acknowledge the limitations of the study?

Answered: 1 week ago