Floozy had the following selected account balances as of December 31, 2014. Acco
ID: 2421372 • Letter: F
Question
Floozy 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's accountant. Adjusting entries have not yet been made.
a. It is estimated that $16,500 of accounts will not be collectible. A provision for uncollectible accounts has never been made by Floozy.
b. Supplies remaining at the end of the year were $27,000.
c. Equipment is straight-line depreciated over 20 years with a $60,000 salvage value.
d. Accrued salaries at 12/31/14 were $27,500.
e. The note receivable was signed by the customer on November 1, 2014. It is a 6-month note with an interest rate of 12%, with the principle and interest paid at maturity.
f. Rent was paid on August 1, 2014, for 24 months and recorded in a prepaid rent account.
g. Floozy does not elect to use the fair value option for any of its financial assets or liabilities. Determine the adjustments necessary for December 31, and indicate the adjusted balances of the selected accounts at December 31, 2014.
Calculate the values for the following items:
1 Accounts receivable (net)
2 Notes receivable
3 Prepaid rent
4 Supplies
5 Inventory
6 Equipment (net)
7 Accounts payable
8 Salaries payable
9 Accumulated depreciation
Explanation / Answer
Journal Entries Particulars Dr Amt Cr Amt Bad dbts Expense Dr 16,500.00 To Allowance for Doubtful Accounts 16,500.00 Supplies Expense Dr 33,000.00 To Supplies 33,000.00 (60,000-27,000) Depreciation Expense Dr 29,000.00 To Accumulated Depreciation 29,000.00 (640,000-60,000)/20 Salaries Expense Dr 27,500.00 To Accrued Salaries or Salaries Payable 27,500.00 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) Particulars Amount 1 Accounts receivable (net) = 250,000 - 15,000 235,000.00 2 Notes receivable 75,000.00 3 Prepaid rent = 168000 -35000 133,000.00 4 Supplies = 27,000.00 5 Inventory 420,000.00 6 Equipment (net) = 640,000-29000 - 174000 437,000.00 7 Accounts payable 176,000.00 8 Salaries payable = 15000 + 27500 42,500.00 9 Accumulated depreciation = 174000 + 29000 203,000.00
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