Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Prepare the adjusting entry on December 31 for Apricot Co. On June 30 of the current calendar year, Apricot Co. paid $9,500 cash for management

Prepare the adjusting entry on December 31 for Apricot Co.

On June 30 of the current calendar year, Apricot Co. paid $9,500 cash for management services to be performed over a two-year period. Apricot follows a policy of recording all prepaid expenses to expense accounts at the time of cash payment.

Tracy Underhill operates as a sole trader. Below is a trial balance extracted from her books as at

31 December 2017.

Trial balance for Tracy Underhill as at 31 December 2017

Debit

Credit

_ .

Sales revenue

695,000

Inventory (as at 1 January 2017)

105,800

Purchases

625,200

Non-current assets at cost:

Equipment

100,000

Motor vehicle

80,000

Accumulated depreciation:

Equipment

10,000

Motor vehicle

10,000

Insurance

14,700

Rent

30,000

Heating and lighting

10,000

Salaries and wages

40,000

Motor expenses

15,300

Miscellaneous expenses

28,500

Receivables

110,000

Allowance for receivables

14,000

Payables

101,500

Cash

71,000

Bank loan

100,000

Capital

300,000

Total

1,230,500

1,230,500

Additional information is provided for use in preparing the companys adjustments:

  1. The value of closing inventory is 102,500.
  2. Interest is payable on the bank loan at eight per cent per annum. The annual amount due as at 31 December 2017 had not yet been paid.
  3. Tracy has paid her rent until 31 March 2018. Her annual rent is 24,000.
  4. Office equipment has a useful life of ten years and a residual value of 0. It is to be depreciated on a straight-line basis.
  5. The motor vehicle with a useful life of ten years and an estimated residual value of 30,000 is to be depreciated on a straight-line basis at a rate of 10%.
  6. Tracy finds that receivables of 10,000 need to be written off as irrecoverable.
  7. The allowance for receivables is to be set at ten per cent of the remaining outstanding receivables as at 31 December 2017.
  8. The heating bill will arrive on 5 January and about 1,000 is expected to relate to the period until 31 December.

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

The Next Step Advanced Medical Coding And Auditing 2016

Authors: Carol J. Buck MS CPC CCS-P

1st Edition

978-0323389105

More Books

Students also viewed these Accounting questions