a. prepare journal entries for the transactions and adjusting entries. Jan. 1- p
ID: 2370794 • Letter: A
Question
a. prepare journal entries for the transactions and adjusting entries.Jan. 1- porter accepted a 4-month 8% not from Anderko Company in payment of Anderko's $1,200 account
Jan. 3- Porter wrote off as uncollectible the accounts of Elrich Corporation ($450) and Rios Company ($280)
Jan. 8- Porter purchased $17,200 of inventory on account
Jan. 11- Porter sold for $25,00 on account inventory that cost $17,500.
Jan. 15- Porter sold inventory that cost $700 to Fred Berman for $1,000. Berman charged this amount on his Visa First Bank Card. The service fee charged porter by first bank is 3%.
Jan. 17- Porter collected $22,900 from customers on account.
Jan. 21- Porter paid $16,300 on accounts payable.
Jan. 24- Porter received payment in full ($280) from Rios Compant on the account written off on Jan 3.
Jan. 27- Porter purchased advertising supplies from $1,400 cash.
Jan. 31- Porter paid other operating expenses, $3,218.
adjustment data:
1. interest is recorded for the month on the note from January 1.
2. Bad debts are expected to be 6% of the January 31, 2012, accounts receivable.
3. A count of advertising supplies on January 31, 2012, reveals that $560 remains unused.
Explanation / Answer
a. prepare journal entries for the transactions and adjusting entries.
Jan. 1- porter accepted a 4-month 8% not from Anderko Company in payment of Anderko's $1,200 account
Debit: Notes receivable 1,200
Credit: Accounts receivable 1,200
Jan. 3- Porter wrote off as uncollectible the accounts of Elrich Corporation ($450) and Rios Company ($280)
Debit: Allowance for uncollectible accounts 730
Credit: Accounts Receivable, Elrich 450
Credit: Accounts Receivable, Rios 280
Jan. 8- Porter purchased $17,200 of inventory on account
Debit: Inventory 17,200
Credit: Accounts Payable 17,200
Jan. 11- Porter sold for $25,00 on account inventory that cost $17,500.
Debit: Accounts Receivable 25,000
Credit: Sales revenue 25,000
Debit: Cost of Goods sold 17,500
Credit: Inventory 17,500
Jan. 15- Porter sold inventory that cost $700 to Fred Berman for $1,000. Berman charged this amount on his Visa First Bank Card. The service fee charged porter by first bank is 3%.
Debit: Cash 970
Debit: Credit Card Expense 30
Credit: Sales Revenue 1,000
Debit: Cost of goods sold 700
Credit: Merchandise Inventory 700
Jan. 17- Porter collected $22,900 from customers on account.
Debit: Cash 22,900
Credit: Accounts Receivable 22,900
Jan. 21- Porter paid $16,300 on accounts payable.
Debit: Accounts Payable 16,300
Credit: Cash 16,300
Jan. 24- Porter received payment in full ($280) from Rios Compant on the account written off on Jan 3.
Debit: Accounts Receivable, Rios 280
Credit: Allowance for uncollectible accounts 280
Debit: Cash 280
Credit: Accounts Receivable, Rios 280
Jan. 27- Porter purchased advertising supplies from $1,400 cash.
Debit: Advertising supplies 1,400
Credit: Cash 1,400
Jan. 31- Porter paid other operating expenses, $3,218.
Debit: Miscellaneous operating expenses 3,218
Credit: Cash 3,218
adjustment data:
1. interest is recorded for the month on the note from January 1.
One month’s interest = 1,200*0.08/12 = 8
Debit: Interest Receivable 8
Credit: Interest Revenue 8
2. Bad debts are expected to be 6% of the January 31, 2012, accounts receivable.
I can’t really do this, because I don’t know what the balance is on January 1, and there obviously is a balance; however, all the journal entries have a net effect of increasing the balance by $170. So if you take the January 1st balance and add 170 to it, and then multiply by 0.06, you will have the amount for bad debt expense, and you would then
Debit: Bad debt expense xxx
Credit: Allowance for uncollectible accounts xxx
(As an example, if your balance on January 1 is 130, you would take 130+170 = 300 and then 300*.06 = 18, and your entry would be:
Debit: Bad debt expense 18
Credit: Allowance for uncollectible accounts 18)
3. A count of advertising supplies on January 31, 2012, reveals that $560 remains unused.
They bought 1,400 and used 560, so 1,400 – 560 = 840.
Debit: Advertising supplies expense 840
Credit: Credit Advertising supplies 840
(Note: If they had a balance in the supplies account before buying the 1,400, this would change things. You would need to add this on. For example, if the balance in the supplies account was 100 at the beginning, 100+1400-560 = 940, and the adjusting entry would be:
Debit: Advertising Supplies expense 940
Credit: Advertising supplies 940
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