Question

The unadjusted trial balance of Peace Hill Inc. at December 31, 2017, is as follows:

Debit Credit $17,120 103,100 Cash Accounts Receivable Allowance for Doubtful Accounts Inventory Prepaid Insurancee Bond Investment at Amortized Cost Land Buildings Accumulated Depreciation-Buildings Equipment Accumulated Depreciation-Equipment Goodwill Accounts Payable Bonds Payable (20-year, 8%) Common Shares Retained Earnings Sales Revenue Rent Revenue Advertising Expense Supplies Expense Purchases Purchase Discounts Salaries and wages expense Interest Expense $3,490 60,400 4,636 57,120 31,700 155,900 6,205 33,240 5,540 16,700 100,200 174,000 115,100 68,976 187,500 10,425 20,250 10,200 97,000 930 53,000 12,000 $672,366 $672,366

Additional information:

1.		Actual advertising costs amounted to $1,350 per month. The company has already paid for advertisements in Crizza MMagazine for the first quarter of 2018.
2.		The building was purchased and occupied on January 1, 2015, with an estimated useful life of 20 years, and residual value of $31,800. (The company uses straight-line depreciation.)
3.		Prepaid insurance contains the premium costs of several policies, including Policy A, cost of $2,568, one-year term, taken out on April 1, 2017; and Policy B, cost of $2,068, three-year term, taken out on September 1, 2017.
4.		A portion of Peace Hill’s building has been converted into a snack bar that has been rented to the ABC Corp. since July 1, 2016, at a rate of $6,950 per year payable each July 1.
5.		One of the company’s customers declared bankruptcy on December 30, 2017. It is now certain that the $2,760 the customer owes will never be collected. This fact has not been recorded. In addition, Peace Hill estimates that 5% of the Accounts Receivable balance on December 31, 2017, will become uncollectible.
6.		An advance of $620 to a salesperson on December 31, 2017, was charged to Salaries and Wages Expense.
7.		On November 1, 2015, Peace Hill issued 174 $1,000 bonds at par value. Interest is paid semi-annually on April 30 and October 31.
8.		The equipment was purchased on January 1, 2015, with an estimated useful life of 10 years, and no residual value. (The company uses straight-line depreciation.)
9.		On August 1, 2017, Peace Hill purchased at par value 42 $1,360, 8% bonds maturing on July 31, 2019. Interest is paid on July 31 and January 31.
10.		The inventory on hand at December 31, 2017, was $88,800 after a physical inventory count. (Use "Inventory" account for closing out the beginning inventory amount and recording the ending inventory amount.) Prepare adjusting and correcting entries for December 31, 2017, using the information given. Record the adjusting entry for inventory using a Cost of Goods Sold account. HERE ARE THE CHOICE OF ACCOUNT TITLES TO USE: Accounts Payable Accounts Receivable Accrued Liabilities Accumulated Amortization - Patent Accumulated Depreciation - Buildings Accumulated Depreciation - Equipment Accumulated Depreciation - Furniture and Fixtures Accumulated Depreciation - Machinery Accumulated Depreciation - Trucks Accumulated Impairment Losses Accumulated OCI Administrative Expenses Advances to Employees Advertising Expense Allowance for Doubtful Accounts Amortization Expense Bad Debt Expense Buildings Cash Common Shares Cost of Goods Sold Current Portion of Notes Payable Deferred Development Costs Delivery Expense Depreciation Expense Dividends Dividends Payable Equipment Fair Value - NI Investments Fair Value - OCI Investments Freight-in Freight-out Furniture and Fixtures Impairment Loss Income Summary Income Tax Expense Insurance Expense Insurance Revenue Interest Expense Interest Income Interest Payable Interest Receivable Inventory Investment Income or Loss Land Legal Expense Loss on Inventory Due to Decline in NRV Miscellaneous Expense Mortgage Payable No Entry Notes Payable Notes Receivable Office Expense Operating Expenses Owner's Capital Owner's Drawings Patents Prepaid Advertising Prepaid Expenses Prepaid Insurance Prepaid Rent Property Tax Expense Property Tax Payable Purchase Discounts Purchase Returns and Allowances Purchases Rent Expense Rent Payable Rent Receivable Rent Revenue Repairs and Maintenance Expense Repair Revenue Retained Earnings Salaries and Wages Expense Salaries and Wages Payable Sales Commission Expense Sales Commission Payable Sales Discounts Sales Returns and Allowances Sales Revenue Service Revenue Supplies Supplies Expense Telephone Expense Trucks Unearned Rent Revenue Unearned Repair Revenue Unearned Revenue Unrealized Gain or Loss - OCI Utilities Expense Utilities Payable

Answer 1

No.	A/c Titles & Explanations	Debit	Credit
1	Prepaid Advertising	4050
	Advertising expense		4050
	(1350*3)
2	Retained earnings (for 2016 depn.)	6205
	Depreciation Expense	6205
	Accumulated Depreciation-Buildings		12410
	(155900-31800)/20
3	Insurance expense	2156
	Prepaid Insurance		2156
	Policy A-(2568/12*9)+
	Policy B- (2068/36*4)
4	Rent Revenue	3475
	Unearned Rent Revenue		3475
	6950/12*6 mths.
5	Allowance for Doubtful Accounts	2760
	Accounts Receivable		2760
	(to record Uncollectible receivables)
	Bad debt expense	4287
	Allowance for Doubtful Accounts		4287
	(103100-2760)=100340*5%=5017+2760-3490
	(To record additional bad debt expense provision required)
6	Advances to Employees	620
	Salaries and wages expense		620
7	Interest expense	1920
	Interest payable		1920
	(174000*8%)-12000
8	Retained earnings (Prior Year)	1108
	Depreciation expense	3324
	Accumulated Depreciation-Equipment		4432
	(33240/10)*3 yrs.=9972-5540=4432
9	Interest receivable	1904
	Interest Income		1904
	(57120*8%*5 mths./12)
10	Inventory(Closing)	88800
	COGS(Bal.fig.)	67670
	Purchase Discounts	930
	Purchases		97000
	Inventory(Beginning)		60400