Question

Record adjusting entries for the year ended December 31, 2018: a. One year of the prepaid insurance has expired. b. Management estirnates that 5% of Accounts Receivable will be uncollectible. c. An inventory of office supplies indicates $475 of supplies have been used. d. Calculate the interest earned on the outstanding Leard Contracting note 5. receivable. Assume the note was received on October 31. Round to the near- est dollar. e. Record depreciation expense for the year. Record amortization expense for the year on the franchise, which has a 10-year life. g. Calculate the interest owed on the note payable. Assume the note was issued on January 1. arnd Plant Assets, Natural Resources, In addition to purchasing the franchise, Top Quality Appliance-Long purchase land with an existing building to use for its retail store, store fixtures equipment. The business will purchase appliances from TQA and resell them inss primarily to local building contractors for installation in new homes Beach will also and office ore, the chart of accounts for Top Quality Appliance Long Beach. As a new all beginning balances are $0 Top Quality Appliance-Long Beach Chart of Accounts Cash Petty Cash Accounts Receivable Allowance for Bad Debts Merchandise inventory Office Supplies Prepaid Insurance Interest Receivable Notes Receivable Land Building Accumulated Depreciation-Building Store Fixtures Accumulated Depreciation-Store Fixtures Credit Card Expense Office Equipment Accumulated Depreciation-Office Equipment Depreciation Expense-Store Fixtures Franchise Accounts Payable Interest Payable Notes Payable Common Stock Retained Earnings Dividends Sales Revenue Interest Revenue Cost of Goods Sold Franchise Fee Expense Salaries Expense Utilities Expense Insurance Expense Supplies Expense Bad Debt Expense Bank Expense Depreciation Expense-Building Depreciation Expense Office Equipment Amortization Expense-Franchise Interest Expense Cash Short and Over Top Quality Appliance-Long Beach completed the following transactions during 2018, its first year of operations: Received $500,000 cash and issued common stock. Opened a new checking account at Long Beach National Bank and deposited the cash received from the stockholders a. b. Paid $50,000 cash for a TQA franchise. Paid $200,000 cash and issued a $400,000, 10-year, 5% notes payable for land with an existing building. The assets had the following market values: Land, $100,000; Building, $500,000 C. d. Paid $75,000 for store fixtures e. f. g. Paid $45,000 for office equipment. Paid $600 for office supplies. Paid $3,600 for a two-year insurance policy. rchased appliances from TQA (merchandise inventory) on account for $425,000. i. Established a petty cash fund for $150. Sold appliances or account to B&B Contractors for $215,000, terms n/30 (cost, $86,000). j. k. Sold appliances to Davis Contracting for $150,000 (cost, $65,000), receiving a 6-month, 8% note. l. Recorded credit card sales of $80,000 (cost, $35,000), net of processor fee of 2%. m. Received payment in full from B&B Contractors. n. Purchased appliances from TQA on account for $650,000 o. Made payment on account to TQA, $300,000 p. Sold appliances for cash to LB Home Builders for $350,000 (cost, $175,000). q. Received payment in full on the maturity date from Davis Contracting for the note r. Sold appliances to Leard Contracting for $265,000 (cost, $130,000), receiving a 9-month, 8% note. Made payment on account to TQA, $500,000. Sold appliances on account to various businesses for $985,000, terms n/30 s. t. (cost, $395,000). Collected $715,000 cash on account. Paid cash for expenses: Salaries, $180,000; Utilities, $12,650 Replenished the petty cash fund when the fund had $62 in cash tickets for $85 for office supplies. Paid dividends, $5,000. Paid the franchise fee to TQA of 5% of total sales of $2,045,000. u. v. w. and petty cash x. y, Beginning Balance, January 1, 2018 Deposits and other credits $500,000 78,400 215,000 350,000 715,000 1,565 Interest Revenue 1,859,965 Checks and other debits: EFT to Bank Checks) Checks 125 50,000 200,000 45,000 75,000 150 3,600 600 300,000 500,000 192,650 2,340 Bank service charge (1,369,465) $ 490,500 Ending balance, December 31, 2018 ") Bank Checks is a company that prints business checks (considered a bank expense) for Top Quality ApplianceLong Beach

Answer 1

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Adjustment Entries				Prepaid Insurance
Account	Debit	Credit		$ 3,600 paid for 2 year policy.
Insurance Expense	1,800.00			1 year has lapsed. So amount to be expenses: 3,600/2= $ 1800.
Prepaid Insurance		1,800.00
				Accounts Receivable
Bad Debt	48,250.00			Sale to B&B contractors	215,000.00
Accounts Receivable		48,250.00		Sale to Davis Contracting	150,000.00
				Credit Sales	80,000.00
Supplies Expense	475.00			Received from B&B	(215,000.00)
Supplies		475.00		Sale to LB Home	350,000.00
				Received from Davis	(150,000.00)
Leard contracting	5,300.00			Sale to Leard	265,000.00
Interest Income		5,300.00		Credit Sales	985,000.00
				Collection on account	(715,000.00)
Deprecation Expense- Building	50,000.00			Balance	965,000.00
Accumulated Deprecation- Building		50,000.00		Uncollectible @ 5%	48,250.00
Deprecation Expense- Stores Fixtures	7,500.00			Interest earned on Leard contracting:
Accumulated Deprecation- Stores Fixtures		7,500.00		Note Value	265,000.00	A
				Interest Rate	8%	B
Deprecation Expense- Office Equipments	4,500.00			Date Received	31-Oct
Accumulated Deprecation- Office Equipments		4,500.00		Closing Date	31-Dec
				Number of months	3.00	C
Amortization Expense- Franchise	5,000.00			Interest earned	5,300.00	D=A*B*C/12
Franchise		5,000.00
				Deprecation Expense
Interest Expense	20,000.00			Nothing is given about life so I am assuming it as 10 years:
Interest Payable		20,000.00		Building	500,000.00	E
				Deprecation Expense- Building	50,000.00	F=E/10
				Stores Fixtures	75,000.00	G
				Deprecation Expense- Stores Fixtures	7,500.00	H=G/10
				Office Equipments	45,000.00	I
				Deprecation Expense- Office Equipments	4,500.00	J=I/10
				Amortization Expense
				Franchise	50,000.00	K
				Amortization Expense- Franchise	5,000.00	L=K/10
				Interest owed on Note Payable:
				Note Value	400,000.00	M
				Interest Rate	5%	N
				Date of issue	1-Jan
				Closing Date	31-Dec
				Number of months	12.00	O
				Interest earned	20,000.00	P=M*N*O