Below please find the unadjusted trial balance
Williams Corporation |
||
Unadjusted Trial Balance |
||
As of the year ended May 31, 2020 |
||
Cash |
33,845 |
|
Accounts Receivable |
88,000 |
|
Allowance for Doubtful Accounts |
300 |
|
Prepaid Rent |
||
Prepaid Insurance |
21,940 |
|
Equipment |
950,333 |
|
Accumulated Depreciation |
215,000 |
|
Patent |
45,000 |
|
Accounts Payable |
73,000 |
|
Short Term Notes Payable |
65,000 |
|
Salaries Payable |
||
Interest Payable |
||
Unearned Fee Revenue |
40,000 |
|
Unearned Service Revenue |
8,000 |
|
Bonds Payable |
300,000 |
|
Discount on Bonds Payable |
28,782 |
|
Common Stock |
100,000 |
|
Retained Earnings |
185,000 |
|
Fee Revenue |
545,000 |
|
Service Revenue |
289,000 |
|
Salaries Expense |
452,000 |
|
Depreciation Expense |
||
Amortization Expense |
||
Bad Debt Expense |
||
Rent Expense |
48,000 |
|
Insurance Expense |
||
Other Operating Expenses |
129,000 |
|
Interest Expense |
22,800 |
|
1,820,000 |
1,820,000 |
Using this trial balance and the additional information below, prepare the necessary adjusting entries.
Policy 1 is an annual policy which runs from January 1st to December 31st. The premium was $9,000 .
Policy 2 was last paid on April 1st and covers a six-month period. The premium was $3,000.
Date |
Cash |
Interest |
Amortization |
Carrying Value |
7/1/2019 |
7,500 |
8,100 |
600 |
270,600 |
1/1/2020 |
7,500 |
8,118 |
618 |
271,217 |
7/1/2021 |
7,500 |
8,136 |
637 |
271,854 |
DATE | ACCOUNT TITLE | DEBIT | CREDIT |
a | Prepaid rent | 12000 | |
Rent expense | 12000 | ||
b | Insurance expense | 4750 | |
Prepaid insurance | 4750 | ||
c | Interest expense | 524 | |
Interest payable | 524 | ||
d | Interest expense (8136*5/6) | 6780 | |
Discount on bond payable | 530 | ||
cash (7500*5/6) | 6250 | ||
e | salaries expense | 3678 | |
salaries payable | 3678 | ||
f | Unearned Service Revenue | 4000 | |
service revenue | 4000 | ||
g | Unearned Fee Revenue | 22000 | |
Fees revenue (40000*55%) | 22000 | ||
h | Amortization expense | 9000 | |
Patent | 9000 | ||
i | Depreciation expense | 147067 | |
Accumulated depreciation | 147067 | ||
j | Bad debt expense | 2940 | |
Allowance for Doubtful Accounts | 2940 |
a)Since the balance in prepaid rent in un-adjusted trial balance is 0 ,it means at time of payment the entire amount is debited to rent expense.So unexpired rent on May 31 will be debited to prepaid rent .
Out of 8months ,rent for 4 months is expired (1Feb-31May) and remaining unexpired .
Unexpired rent = 24000*4/8 = 12000
b)Policy 1:Out of 12months period ,insurance is expired for 5 months (1Jan -31May) :9000*5/12=3750
Policy 2 :Out of 6 months ,insurance expired for 2 months (1April -31May) :3000*2/6= 1000
Total insurance expense: 3750 +1000= 4750
c)Interest is accrued for 49 days (12 April -31 May ) : 65000*.06*49/365=523.56
d)Being interest on bond is accrued for 5months (1Jan -31May ) to be payable on July 1 2020 out of semiannual period of 6 months
f)Being service revenue earned for 2 months (1April -31May )= 2000*2 =4000
h)Being patent amortized :cost /useful life
= 45000/5
= 9000
i)carrying value of equipment =cost-accumulated depreciation
= 950333-215000
= 735333
Depreciation rate = 2/useful life
= 2/10
= .20 or 20%
Depreciation expense= 735333*20%= 147066.6
j)Allowance balance at year end = Accounts receivable *rate
= 88000 *3%
= 2640
Bad debt expense= Required balance in allowance account at year end - Un-adjusted balance at year end
= 2640- (-300)
= 2640 +300
= 2940
Normal balance of allowance account is credit so debit balance in un-adjusted trial balance for allowance account represent -300
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