If you can provide detailed step by step explanations, I would really appreciate

Question

If you can provide detailed step by step explanations, I would really appreciate it. I have the answer, but I don't understand how to get to it. Thank you!

Instructions Prepare the necessary adjusting journal entries indicated by each item for the year ended December 31, 2017. 27. Data relating to the balances of various accounts affected by adjusting or closing entries appear below. (The entries which caused the changes in the balances are not given.) You are asked to supply the missing journal entries which would logically account for the changes in the account balances. Interest receivable at 1/1/17 was $1,000. During 2017 cash received from debtors for interest on outstanding notes receivable amounted to $5,000. The 2017 income statement showed interest revenue in the amount of $8,400. You are to provide the missing adjusting entry that must have been made. a. b. Unearned rent at 1/1/17 was $5,300 and at 12/31/17 was $8,000. The records indicate cash receipts from rental sources during 2017 amounted to $55,000, all of which was credited to the Unearned Rent Revenue account. You are to prepare the missing adjusting entry. c. Allowance for doubtful accounts on 1/1/17 was $50,000. The balance in the allowance account on 12/31/17 after making the annual adjusting entry was $65,000 and during 2017 bad debts written off amounted to $30,000. You are to provide the missing adjusting entry.

Explanation / Answer

Answers

--Interest receivables beginning balance on 1/1/17 was $ 1,000. This means that Interest revenue of $ 1000 was earned in previous years(s) but is not received in cash yet.

---Now, when in 2017, Cash received was $ 5,000 for Interest. This $ 5000 includes payment of interest that was due to be received before 2017.

---Hence, the missing adjusting entry would be:

Accounts title

Debit

Credit

(a)

Interest Revenue

$                                     1,000.00

Interest receivables

$                     1,000.00

(missing entry made to debit excess revenue credited)

---Unearned rent Beginning balance = $ 5300

---Amount credited to Unearned rent revenue during 2017 = $ 55000

---After these credits, the ending balance of Unearned Rent should be 5300 + 55000 = $ 60,300

---However, the question says that Unearned Rent Ending balance = $ 8000 (not $ 60300)

---This means that some amount has been Debited. Amount debited = $ 52,300

---This $ 52,300 is the Rent Revenue earned during the period.

---Entry would be:

Accounts title

Debit

Credit

(b)

Unearned rent

$                                   52,300.00

Rent Revenue Earned

$                  52,300.00

(earned revenue recorded)

---Beginning balance of Allowance account = $ 50000

---During the year $ 30000 of accounts are written off. This is recorded on the debit side of Allowance account. Hence, this entry would have reduced the Allowance balance to $ 20,000 Credit (from $ 50000 credit balance)

---Ending balance given = $ 65,000 (credit)

---To make the balance go from $ 20,000 credit to adjusted $ 65000 credit balance, the Allowance account have to be credited by $ 45,000.

---This credit is recorded as Bad Debt Expense.

---required entry would be:

Accounts title

Debit

Credit

(c )

Bad Debt Expenses

$                                   45,000.00

Allowance for Doubtful Accounts

$                  45,000.00

(bad debt expense recorded)

Accounts title

Debit

Credit

(a)

Interest Revenue

$                                     1,000.00

Interest receivables

$                     1,000.00

(missing entry made to debit excess revenue credited)

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