Question

FCM used the following information to make adjusting entries:

A physical count of supplies indicated that, as of December 31, 2017, $700 worth of supplies were on hand.

On December 15, a $55,000 social marketing project had been completed for JonyJones, but FCM forgot to record the transaction. You identify this oversight on December 31st and issue an invoice for $55,000.

On November 1, YMCA-Austin began negotiations with FCM for $42,000 of video production services. FCM would perform the video production services for YMCA-Austin over a 12-month period. FCM signed the contract on December 1, 2017 and began shooting immediately. Payments for the work are to be spread evenly throughout the 12-month period, with FCM billing YMCA-Austin on the last day of every month. FCM did not receive payment from YMCA-Austin for work FCM performed during December until January 1, 2018.

December 2017’s electricity bill of $100 was accrued on December 31 but was received and paid on January 2nd, 2018.

December’s Internet and telephone bill of $230 was accrued at month end and paid on January 3, 2018.

Make the adjusting entry necessary to record depreciation expense for all of 2017. Your assistant has calculated depreciation for the year, as shown in in the “Extra Info” tab. FCM’s management has decided that a full month of depreciation is recorded if an asset is held for 15 days or more; if the asset is used less than 15 days in a month, no depreciation is recognized. For example, the equipment acquired on March 19 is depreciated as if it had been purchased bought on April 1. A computer sold on November 11 is depreciated as if it had only been used until October 31.

FCM paid $9,000 for a one-year lease on October 1, 2017. The lease covers rent for October 1 2017 through September 30, 2018. FCM has properly accrued for rent on a monthly basis through November 30th. FCM still needs to record December 2017 leasing costs.

The Allowance for Doubtful Accounts should be established at 1% of Accounts Receivable as of December 31, 2017. Compute the balance after making the December adjusting entries.

During 2017 there were four notes payable outstanding (the three indicated below and the one repaid on December 26). Interest for two of these notes (SnapCut and WestBestVideo) is paid at maturity; interest on the Wells Fargo note is paid semiannually. Proper accruals of the interest related SnapCut and WestBestVideo were done as of November 30, 2017. Interest for December 2017 needs to be recorded. Your assistant calculated interest for December 2017 below:

SnapCut Inc., 8.5%, 6 months, due Apr. 30, 2018 7,000 x 0.085 x (1/12) = 50

WestBestVideo, 8%, 6 months, due Apr. 30, 2018 2,000 x 0.08 x (1/12) = 13

Wells Fargo, 5%, 5 years, due Dec. 1, 2022 30,000 x 0.05 x (1/12) = 125 28.

Insurance expense for December 2017 needs to be recorded (see item #6).

Answer 1

Ans:    Journal Entries for FCM

Date (For Year 2017)	Particulars	Debit ($)	Credit ($)
31.Dec	Inventory A/c    Dr. To Purchase A/c (Being inventory in hand)	700	700
31.Dec	Account Receivable A/c Dr. To Revenue A/c ( Being revenue recoded on completion of Social Marketing Project for Jony Jones)	55,000	55,000
31.Dec	Account Receivable A/c Dr. ($42,000/12) To Revenue A/c ( Being revenue recoded on video production services for YMCA-Austin)	3,500	3,500
31.Dec	Electricity Expenses A/c Dr. To Accrued Expenses A/c (Being Electricity Expenses accrued)	100	100
31.Dec	Internet and telephone Expenses A/c Dr. To Accrued Expenses A/c (Being Internet and telephone Expenses accrued)	230	230
31.Dec	Rent A/c Dr. To Prepaid Lease A/c (Being Rent for the month of December recorded through prepaid lease A/c)	750	750
31.Dec	Bad Debt A/c Dr. ((55,000+3,500)*1%)    To Allowance for Doubtful debts A/c (Being Bad debts recorded)	585	585
31.Dec	Interest Expenses A/c Dr. (50+13+125) To Interest Payable A/c ( Being Interest Expenses for the month of Dec 2107 Recorded)	188	188