Comprehensive Accounting Cycle Review 9-2 (Part Level Submission) Whispering Win

Question

Comprehensive Accounting Cycle Review 9-2 (Part Level Submission) Whispering Winds Corp. prepares quarterly financial statements. The post-closing trial balance at December 31, 2016, is presented below. WHISPERING WINDS CORP. Post-Closing Trial Balance December 31, 2016 Debit $23,400 22,600 Credit Cash Accounts Receivable Allowance for Doubtful Accounts Equipment Accumulated Depreciation Equipment Buildings Accumulated Depreciation-Buildings Land Accounts Payable Common Stock Retained Earnings $1,500 24,000 10,000 109,000 10,000 20,000 12,100 82,000 83,400 $199,000 $199,000 During the first quarter of 2017, the following transactions occurred: On February 1, Sheffield collected fees of $10,800 in advance. The company will perform $900 of services each month from February 1, 2017, to January 31, 2018

Explanation / Answer

3)Accounts receivable =beginning+credit sales -collections-write off

   = 22600+140000-133000-200

      = $ 29400

Allowance for doubtful account at end = [25600*.04]+[(29400-25600)*.22]

         = 1024+ 836

         = $ 1860

Allowance balance before adjustment :1500-200write off = 1300

Bad debt expense = 1860-1300existing credit balance = 560

4a)Old equipment =24000 beginning -12000 sold = 12000

depreciation on old equipment for 3 months (1 jan-31march) =[(cost-salvage)/years]*n/12

             = [12000/10]*3/12

             = $ 300

4b)cost of new equipment =7875+525=8400

depreciation on new equipment for 2 months [1feb-31march]

            = [8400-900]/5 * 2/12

           = 250

7)

Income tax expense =42855*.30= 12856.5   [rounded to 12857]

Income statement Revenue [140000+(900*2)unearned service revenue earned ] 141800 less: other operating expense [95500+100] -95600 depreciation expense on building -775 depreciation expense on equipment[550+300+250] -1100 amortisation -70 loss on disposal -840 bad debt expense -560 income before tax 42855

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