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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, 2019 Cash Accounts receivable Allowance for doubtful accounts Merchandise inventory Trucks Accum. depreciation-Trucks Equipment Accum. depreciation-Equipment Accounts payable Estimated warranty liability Unearned services revenue Interest payable Long-term notes payable Common stock Retained earnings Dividends Extermination services revenue Interest revenue Sales (of merchandise) of goods sold Depreciation expense-Trucks Depreciation expense-Equipment Wages expense Interest expense Rent expense Bad debts expense Miscellaneous expense Repairs expense Utilities expense Warranty expense Totals Unadjusted Trial Balance $ 20,400 5,700 $ 862 16,800 49,000 0 101,600 25,800 5,850 2,250 0 0 32,000 27,000 71,400 27,000 94,000 906 117,826 51,400 0 0 52,000 0 26,000 0 1, 294 16,500 10,200 0 $377,894 $377,894 Cost of 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, 2019, includes the following facts. Cash balance per bank Cash balance per books Outstanding checks Deposit in transit Interest earned (on bank account) Bank service charges (miscellaneous expense) $16,800 20,400 2,650 3,300 86 32 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 $696 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 $785. c. 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 Expected salvage value Useful life (years) $40,500 $14,800 4 d. 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. Original cost Expected salvage value Useful life (years) Sprayer Injector $40,600 $21,400 $ 3,000 $ 4,200 8 5 e. On September 1, 2019, the company is paid $23,100 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. f. The company offers a warranty for the services it sells. The expected cost of providing warranty service is 2.5% of the extermination services revenue of $78,600 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. g. The $23,500 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. h. The ending inventory of merchandise is counted and determined to have a cost of $16,800. Bug-Off uses a perpetual inventory system. Required: 1. 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 2019. d. Depreciation expense for the two items of equipment used during year 2019. e. The adjusted 2019 ending balances of the Extermination Services Revenue and Unearned Services Revenue accounts. f. The adjusted 2019 ending balances of the accounts for Warranty Expense and Estimated Warranty Liability. g. 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 items a through g and then completing the adjusted trial balance columns. Hint: Item brequires 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 a single-step income statement for year 2019. 4b. Prepare the statement of retained earnings (cash dividends during 2019 were $27,000) for 2019. 4c. Prepare a classified balance sheet as at 2019. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Req 4A Req 4B Req 4C Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req3 Reg 4A Req 48 Reg 4C 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. (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.) View transaction list Journal entry worksheet 1 2. 3 4 5 6 7 8 > Record the adjustment to the Cash account. Note: Enter debits before credits Debit Credit Transaction General Journal (a) Dandant Clear entry View general journal Reg 1 Req 2 Req 3 Req 4A Req 4B Req 4C 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. (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.) View transaction list Journal entry worksheet 1 3 4 5 6 7 8 > Record the write off of uncollectible accounts. Note: Enter debits before credits. General Journal Debit Credit Transaction (51) Req 1 Reg 2 Req3 Req 4A Reg 4B Req 4C 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. (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.) View transaction list Journal entry worksheet 1 2. 4 > 5 6 7 8 Record the adjustment for bad debts. Note: Enter debits before credits. Debit Credit General Journal Transaction (52) 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. (If no entry is required for a particular transaction, select "No journal entry required" the first account field. Do not round your intermediate calculations.) View transaction list Journal entry worksheet Record depreciation on the truck. Note: Enter debits before credits. Transaction General Journal Debit Credit Req 1 Reg 2 Req3 Req 4A Req 4B Req 4C Prepare journal entries to record the adjustments entered on the six-column table. Assume Bug-Off's adjusted balance for Merchandis Inventory matches the year-end physical count. (If no entry is required for a particular transaction, select "No journal entry required" the first account field. Do not round your intermediate calculations.) View transaction list Journal entry worksheet Record depreciation on the equipment. Note: Enter debits before credits. Transaction General Journal Debit Credit (d) Req 1 Req 2 Reg 3 Req 4A Reg 4B Req 4C 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. (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.) View transaction list Journal entry worksheet 2 3 4 5 7 8 > Recorded the adjustment for unearned revenues. Note: Enter debits before credits, Transaction General Journal Debit Credit (e) 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. (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.) View transaction list Journal entry worksheet Record the estimated warranty expense. Note: Enter debits before credits. Transaction General Journal Debit Credit 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. (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.) View transaction list Journal entry worksheet 1 2 3 4 5 6 7 > Shop Record the adjustment for interest. Note: Enter debits before credits. Transaction General Journal Debit Credit (9) Req 1 Reg 2 Reg 3 Req 4A Reg 4B Reg 4C Prepare a single-step income statement for year 2019. BUG-OFF EXTERMINATORS Income Statement For Year Ended December 31, 2019 Revenues $ 0 Total revenues Expenses 0 Total expenses $ 0 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, 2019 Cash Accounts receivable Allowance for doubtful accounts Merchandise inventory Trucks Accum. depreciation-Trucks Equipment Accum. depreciation-Equipment Accounts payable Estimated warranty liability Unearned services revenue Interest payable Long-term notes payable Common stock Retained earnings Dividends Extermination services revenue Interest revenue Sales (of merchandise) of goods sold Depreciation expense-Trucks Depreciation expense-Equipment Wages expense Interest expense Rent expense Bad debts expense Miscellaneous expense Repairs expense Utilities expense Warranty expense Totals Unadjusted Trial Balance $ 20,400 5,700 $ 862 16,800 49,000 0 101,600 25,800 5,850 2,250 0 0 32,000 27,000 71,400 27,000 94,000 906 117,826 51,400 0 0 52,000 0 26,000 0 1, 294 16,500 10,200 0 $377,894 $377,894 Cost of 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, 2019, includes the following facts. Cash balance per bank Cash balance per books Outstanding checks Deposit in transit Interest earned (on bank account) Bank service charges (miscellaneous expense) $16,800 20,400 2,650 3,300 86 32 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 $696 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 $785. c. 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 Expected salvage value Useful life (years) $40,500 $14,800 4 d. 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. Original cost Expected salvage value Useful life (years) Sprayer Injector $40,600 $21,400 $ 3,000 $ 4,200 8 5 e. On September 1, 2019, the company is paid $23,100 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. f. The company offers a warranty for the services it sells. The expected cost of providing warranty service is 2.5% of the extermination services revenue of $78,600 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. g. The $23,500 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. h. The ending inventory of merchandise is counted and determined to have a cost of $16,800. Bug-Off uses a perpetual inventory system. Required: 1. 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 2019. d. Depreciation expense for the two items of equipment used during year 2019. e. The adjusted 2019 ending balances of the Extermination Services Revenue and Unearned Services Revenue accounts. f. The adjusted 2019 ending balances of the accounts for Warranty Expense and Estimated Warranty Liability. g. 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 items a through g and then completing the adjusted trial balance columns. Hint: Item brequires 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 a single-step income statement for year 2019. 4b. Prepare the statement of retained earnings (cash dividends during 2019 were $27,000) for 2019. 4c. Prepare a classified balance sheet as at 2019. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Req 4A Req 4B Req 4C Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req3 Reg 4A Req 48 Reg 4C 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. (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.) View transaction list Journal entry worksheet 1 2. 3 4 5 6 7 8 > Record the adjustment to the Cash account. Note: Enter debits before credits Debit Credit Transaction General Journal (a) Dandant Clear entry View general journal Reg 1 Req 2 Req 3 Req 4A Req 4B Req 4C 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. (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.) View transaction list Journal entry worksheet 1 3 4 5 6 7 8 > Record the write off of uncollectible accounts. Note: Enter debits before credits. General Journal Debit Credit Transaction (51) Req 1 Reg 2 Req3 Req 4A Reg 4B Req 4C 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. (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.) View transaction list Journal entry worksheet 1 2. 4 > 5 6 7 8 Record the adjustment for bad debts. Note: Enter debits before credits. Debit Credit General Journal Transaction (52) 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. (If no entry is required for a particular transaction, select "No journal entry required" the first account field. Do not round your intermediate calculations.) View transaction list Journal entry worksheet Record depreciation on the truck. Note: Enter debits before credits. Transaction General Journal Debit Credit Req 1 Reg 2 Req3 Req 4A Req 4B Req 4C Prepare journal entries to record the adjustments entered on the six-column table. Assume Bug-Off's adjusted balance for Merchandis Inventory matches the year-end physical count. (If no entry is required for a particular transaction, select "No journal entry required" the first account field. Do not round your intermediate calculations.) View transaction list Journal entry worksheet Record depreciation on the equipment. Note: Enter debits before credits. Transaction General Journal Debit Credit (d) Req 1 Req 2 Reg 3 Req 4A Reg 4B Req 4C 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. (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.) View transaction list Journal entry worksheet 2 3 4 5 7 8 > Recorded the adjustment for unearned revenues. Note: Enter debits before credits, Transaction General Journal Debit Credit (e) 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. (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.) View transaction list Journal entry worksheet Record the estimated warranty expense. Note: Enter debits before credits. Transaction General Journal Debit Credit 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. (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.) View transaction list Journal entry worksheet 1 2 3 4 5 6 7 > Shop Record the adjustment for interest. Note: Enter debits before credits. Transaction General Journal Debit Credit (9) Req 1 Reg 2 Reg 3 Req 4A Reg 4B Reg 4C Prepare a single-step income statement for year 2019. BUG-OFF EXTERMINATORS Income Statement For Year Ended December 31, 2019 Revenues $ 0 Total revenues Expenses 0 Total expenses $ 0
