Question

P#4-Adjusting entries and account classification. Selected amounts from Trent Company's trial balance of 12/31/17 appear below 1. Accounts Payable $ 160,000 2. Accounts Receivable 150,000 3. Accumulated Depreciation Equipment 200.000 4. Allowance for Doubtful Accounts 20,000 5. Bonds Payable 500,000 6. Cash 150.000 7. Common Stock 60,000 8. Equipment 870,000 9. Prepaid Insurance 30,000 10. Interest Expense 10,000 11. Inventory 300,000 12. Notes Payable (due 6/1/18) 200,000 13. Prepaid Rent 240,000 14. Retained Earnings 818,000 15. Salaries and Wages Expense 328,000 (All of the above accounts have their standard or normal debitor credit balance.) Part A Prepare adjusting journal entries at year end, December 31, 2017, based on the following supplemental information. a. The equipment has a useful life of 15 years with no salvage value. (Straight-line method being used.) b. Interest accrued on the bonds payable is $15,000 as of 12/31/17. c. Prepaid insurance at 12/31/17 is $22,000. d. The rent payment of $240,000 covered the six months from November 30, 2017 through May 31, 2018. e. Salaries and wages earned but unpaid at 12/31/17, 522,000. Part B. Indicate the proper balance sheet classification of each of the 15 numbered accounts in the 12/31/17 trial balance before adjustments by placing appropriate numbers after each of the following classifications. If the account title would appear on the income statement, do not put the number in any of the classifications. a. Current assets b. Property, plant, and equipment c. Current liabilities d. Long-term liabilities e. Stockholders' equity

Answer 1

Part A: Here's the journal entries for said transactions along with appropriate computations: (Last column is provided to understand the calculation based on which the numbers are arrived at and need not form part of answer to this question)

Credit Debit 58,000 Explanation $870000 / 15 years 58,000 15,000 15,000 8,000 $ 30000 - $ 22000 Ref Dr / Cr Account Title a Dr Depreciation Expense Cr Accumulated Depreciation-Equipment (To record depreciation for year 2017) b Dr Interest Expense Tcr Interest Payable (To record accrued interest on bond payable) C Dr Insurance Expense Cr Prepaid insurance (to record insurance expense for year 2017) d Dr Rent Expense Cr Prepaid Rent |(To record rent expense for period Nov & Dec 2017) e Dr Salaries and Wages Expense Cr Salaries and wages payable (to record outstanding salaries and wages) 8,000 80,000 $240000 / 6 months * 2months 80,000 22,000 22,000

Part B: Here's the Trial balance before adjustment with appropriate account classifications: Please note any trial balance has to get reconciled (i.e.) Total of all debits should equal to total of all credits. but in this case, it is not. Hence assumed that the numbers are provided only for understanding the account classification and not to prepare income statement or balance sheet, in which case, trial balance (either before adjustment or after adjustment entries) has to get reconciled at first place.

Sub-Total Debit Credit Totals Debit Credit 850,000 150,000 300,000 150,000 -20,000 30,000 240,000 670,000 870,000 -200,000 Account Title Current Assets: Cash Inventory Accounts Receivable Allowance for Doubtful accounts Prepaid Insurance Prepaid Rent Property, plant and Equipment Equipment Accumulated Depreciation-Equipment Current Liabilities Accounts Payable Notes Payable (due 6/1/18) Long Term Liabilities Bonds Payable Stocholder's Equity Common Stock Retained Earnings Income Statement: Interest Expense Salaries and Wages Expenses 360,000 160,000 200,000 500,000 500,000 878,000 60,000 818,000 10,000 328,000