Question

Please show all supporting computations. Points will be deducted if you do not show your work. 1. Presented below is the unadjusted trial balance for Steven's Industries: Steven's Industries Trial Balance Credit Debit $ 6,000 18.000 S 500 5.000 2.000 84.000 Cash. Accounts Receivable Allowance for Doubtful Accounts Inventory Supplies..... Equipment Accumulated Depreciation - Equipment. Notes Payable.. Accounts Payable. Common Stock Retained Earnings Sales Revenue Cost of Goods Sold Salaries Expense Insurance Expense Advertising Expense 15,000 20.000 11.000 25.000 31,500 188,500 125.500 48,000 1,500 1.500 $291.500 $291.500

Please help me understand this problem. Thank you for your help.

Answer 1

a) Adjusting entry for each item: No. Adjust-1 Debit $12,000 Credit [$84,000 / 7 years] $12,000 [As salvage value is zero, equipment's cost is depreciated] Adjust-2 $67 [$20,000 x 4% x (1/12)] $67 Adjust-3 $1,460 $1,460 (Given] Account Titles Depreciation Expense Accumulated Depreciation-Equipment (To record depreciation expense accrued for the period) Interest Expense Interest Payable (To record interest expense accrued for one month) Salaries Expense Salaries Payable (To record salaries accrued and yet to be paid) Prepaid Insurance Insurance Expense (To record insurance still unexpired) Supplies Expense Supplies (To record supplies used for the period) Bad Debt Expense Allowance for Doubtful Accounts (To record estimated additional bad debt expense) Adjust-4 $850 $850 (Deferred portion for unexpired insurance] Adjust-5 $1,550 [$2,000 - $450] $1,550 [Difference between Supplies purchased and available on hand] Adjust-6 $150 ($650 - $500] $150 [Existing credit balance in Allowance account is considered]

b) Reversing entries for items where appropriate: No. Credit Reverse-1 Reverse-2 $67 Reverse-3 $150 Account Titles Debit No Entry (Depreciated portion pertaining to previous period was recorded and so there is no need for reversing entry in subsequent period) Interest Payable $67 Interest Expense (To record interest payable deferred and incurred) Salaries Payable $150 Salaries Expense (To record salaries payable deferred and incurred) No Entry (Expired portion pertaining to previous period was recorded and so there is no need for reversing entry in subsequent period) No Entry (Used portion pertaining to previous period was recorded and so there is no need for reversing entry in subsequent period) Allowance for Doubtful Accounts $150 Bad Debt Expense (To reverse estimated bad debt expense of prior period) Reverse-4 Reverse-5 Reverse-6 $150