Floozy Corporation had the following selected account balances as of December 31
ID: 2421365 • Letter: F
Question
Floozy Corporation had the following selected account balances as of December 31, 2014.
Accounts receivable $250,000
Notes receivable 75,000
Prepaid rent 168,000
Supplies 60,000
Inventory 420,000
Equipment (historical cost) 640,000
Accounts payable 176,000
Salaries payable 15,000
Accumulated depreciation 174,000
The following information was received from Floozy Corporation's accountant. Adjusting entries have not yet been made.
a. It is estimated that $15,000 of accounts will not be collectible. A provision for uncollectible accounts has never been made by Floozy Corporation.
b. Supplies remaining at the end of the year were $37,500.
c. Equipment is depreciated over 20 years with a $60,000 salvage value.
d. Accrued salaries at 12/31/14 were $37,000.
e. The note receivable was signed by the customer on November 1, 2014. It is a 6-month note with an interest rate of 10%, with the principle and interest paid at maturity.
f. Rent paid on August 1, 2014, for 24 months and recorded in a prepaid rent account.
Floozy Corporation does not elect to use the fair value option for any of its financial assets or liabilities.
Prepare the adjusting journal entries necessary for each item. Do not provide any journal explanations. If no entry is necessary, write "no entry."
Explanation / Answer
Journal Entries Particulars Dr Amt Cr Amt Bad dbts Expense Dr 15,000.00 To Allowance for Doubtful Accounts 15,000.00 Supplies Expense Dr 22,500.00 To Supplies 22,500.00 (60,000-37,500) Depreciation Expense Dr 29,000.00 To Accumulated Depreciation 29,000.00 (640,000-60,000)/20 Salaries Expense Dr 37,000.00 To Accrued Salaries 37,000.00 Interest Receivable Dr 1,250.00 To Interest Revenue 1,250.00 (75000*10%*2/12) Rent expense Dr 35,000.00 To Prepaid Rent 35,000.00 (168,000*5/24)
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