Scenario for adjusting entries: Year end is December 31, 2017. Peyton Baking Company uses the following accounting practices: o o Inventory: Periodic, FIFO for both baking and merchandise o Baking supplies: $27,850 ending inventory Equipment: Straight line method used for equipment Mixing machine: $5,000 initial cost, $500 salvage value, 3rd year of use of 7 total ($ 642.86 per year) Ovens: $8,000 initial cost, $1,000 salvage value, 3rd year of use of 7 total ($1,000 per year) Other depreciable equipment: $4,000 initial cost, $0 salvage value, 1st year of use of 4 total ($1,000 per year) Bakery Leasehold Improvements: $10,000, 2nd year of use ($2,000 per year) Trademark for company name: Initial cost, $2,300, 3rd year of use Office supplies: Periodic, FIFO. Ending balance is $250. Pay period is every 2 weeks. Last pay period ended December 27. o 60 employees with a daily pay of $5,700. All receive pay through December 31. Financing: 6% interest note payable was made on January 31, 2017, and is due February 1, 2019. 5-year loan was made on June 1, 2017. Terms are 7.5% annual rate, interest only until due date. Insurance: Annual policy covers 12 months, purchased in February, covering March 2017- February 2018. No monthly adjustments have been made. o Other information: An employee slipped and fell in the baking area and has filed a lawsuit. The company lawyer indicates that it is probable that the company will be found liable. No additional information is available. Peyton Approved Adjusting Journal Entries 2017 Debit Credit Date Accounts 31-Dec Depreciation Expense Accumulated depreciation 31-Dec Amortization Expense Accumulated Amortization 31-Dec Interest Expense Interest Payable 31-Dec Insurance Expense Prepaid Insurance 31-Dec Baking Cost of Goods Sold Baking Supplies 31-Dec Office Supplies Expense Office Supplies 31-Dec Wages Expense Wages Payable Scenario for adjusting entries: Year end is December 31, 2017. Peyton Baking Company uses the following accounting practices: o o Inventory: Periodic, FIFO for both baking and merchandise o Baking supplies: $27,850 ending inventory Equipment: Straight line method used for equipment Mixing machine: $5,000 initial cost, $500 salvage value, 3rd year of use of 7 total ($ 642.86 per year) Ovens: $8,000 initial cost, $1,000 salvage value, 3rd year of use of 7 total ($1,000 per year) Other depreciable equipment: $4,000 initial cost, $0 salvage value, 1st year of use of 4 total ($1,000 per year) Bakery Leasehold Improvements: $10,000, 2nd year of use ($2,000 per year) Trademark for company name: Initial cost, $2,300, 3rd year of use Office supplies: Periodic, FIFO. Ending balance is $250. Pay period is every 2 weeks. Last pay period ended December 27. o 60 employees with a daily pay of $5,700. All receive pay through December 31. Financing: 6% interest note payable was made on January 31, 2017, and is due February 1, 2019. 5-year loan was made on June 1, 2017. Terms are 7.5% annual rate, interest only until due date. Insurance: Annual policy covers 12 months, purchased in February, covering March 2017- February 2018. No monthly adjustments have been made. o Other information: An employee slipped and fell in the baking area and has filed a lawsuit. The company lawyer indicates that it is probable that the company will be found liable. No additional information is available. Peyton Approved Adjusting Journal Entries 2017 Debit Credit Date Accounts 31-Dec Depreciation Expense Accumulated depreciation 31-Dec Amortization Expense Accumulated Amortization 31-Dec Interest Expense Interest Payable 31-Dec Insurance Expense Prepaid Insurance 31-Dec Baking Cost of Goods Sold Baking Supplies 31-Dec Office Supplies Expense Office Supplies 31-Dec Wages Expense Wages Payable
