4. Based on the following selected data, journalize the adjusting entries as of

Question

4. Based on the following selected data, journalize the adjusting entries as of December 31 of the current year:

A. Estimated uncollectible accounts at December 31, $16,000, based on an aging of accounts receivable. The balance of Allowance for Doubtful Accounts at December 31 was $2,000 (debit).

B. The physical inventory on December 31 indicated an inventory shrinkage of $3,300.

C. Prepaid insurance expired during the year, $22,820.

D. Office supplies used during the year, $3,920.

E. Depreciation is computed as follows:

F. A patent costing $48,000 when acquired on January 2 has a remaining legal life of 10 years and is expected to have value for 8 years.

G. The cost of mineral rights was $546,000. Of the estimated deposit of 910,000 tons of ore, 50,000 tons were mined and sold during the year.

H. Vacation pay expense for December, $10,500.

I. A product warranty was granted beginning December 1 and covering a one-year period. The estimated cost is 4% of sales, which totaled $1,900,000 in December.

J. Interest was accrued on the note receivable received on October 17.

Asset Cost Residual Value Acquisition Date Useful Life in Years Depreciation Method Used Buildings $900,000 $ŠŠ0 January 2 50 Double-declining-balance Office Equip. 246,000 26,000 January 3 ŠŠ5 Straight-line Store Equip. 112,000 12,000 July 1 10 Straight-line

Explanation / Answer

a Bad Debt Expense          18,000 Allowance for Doubtful Accounts          18,000 b Inventory Short and Over            3,300 Merchandise Inventory            3,300 c Insurance Expense          22,820 Prepaid Insurance          22,820 d Supplies Expense            3,920 Office Supplies            3,920 e Depreciation Expense, Buildings          36,000 Accumulated Depreciation, Buildings          36,000 Double-declining balance (at twice the straight-line rate) 100% /50 = 2% Straight-line rate. 2% x 2 = 4% Double-declining rate. 900,000 x 4% = 36,000 Depreciation Expense, Office Equip          44,000 Accumulated Depreciation, Office Equip          44,000 Straight-line 246,000-26000 / 5 = 10,000 Depreciation Expense, Store Equip            5,000 Accumulated Depreciation, Store Equip            5,000 Staight-line (112,000 - 12,000) /10 = 10,000 Per year. But only 6 months are depreciated. f Patent Amortization            6,000 Patents            6,000 48000/8 g Depletion Expense 30000 Accumulated Depletion          30,000 546,000/910,000*50,000 h Wages Expense          10,500 Wages Payable          10,500 i Warranty Expense 76000 Estimated Liability under Warranties          76,000 1,900,000*4% j Accrued Interest Receivable Interest Revenue

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