Using the following transactions, prepare the adjusting entry to record the prop
ID: 2604561 • Letter: U
Question
Using the following transactions, prepare the adjusting entry to record the proper expense for 2017 and the journal entry to write off two uncollectible accounts for Fee’s Fountain.
A fire insurance policy for January 1, 2015, through December 31, 2016 was purchased on December 15, 2014. The premium paid totaled $24,000 and was recorded as prepaid insurance.
The operation purchased a used cash register costing $8,000 on December 18, 2014 and recorded it on the equipment account. The cash register is expected to have a useful life of five years and a salvage value of $0. No depreciation has been recorded. Fee’s uses the straight-line method of depreciation.
The employees were paid for their work through December 28. They worked 100 hours for the period of December 29-31 and will be paid January 10. The average hourly wage is $8.00. The related payroll taxes are 10 percent of the wages.
Sales for the year totaled $1,000,000. The allowance for doubtful accounts has a December 31 balance of $1,500 prior to write-off of two accounts totaling $300. The allowance should be adjusted at year-end to ¾ percent of sales for the year.
The electric bill for the period of December 15 through Jan. 10th totaled $320. It has not been recorded and will be paid January 15.
Explanation / Answer
Account Titles
Debit
Credit
December 31, 20X5
$
$
1.
Insurance Expense
12,000
Prepaid Insurance
12,000
2.
Depreciation Expense
1,600
Accumulated Depreciation - Equipment
1,600
3.
Wages Expense
800
Wages Payable
720
Payroll Taxes Payable
80
4.
Bad Debt Expense ( $ 1,000,000 x 0.75%) - $ ( 1,500 -300)
6,300
Allowance for Doubtful Accounts
6,300
5.
Utilities Expense ( $ 320 x 17 / 27)
201
Accrued Utilities Payable
201
Account Titles
Debit
Credit
December 31, 20X5
$
$
1.
Insurance Expense
12,000
Prepaid Insurance
12,000
2.
Depreciation Expense
1,600
Accumulated Depreciation - Equipment
1,600
3.
Wages Expense
800
Wages Payable
720
Payroll Taxes Payable
80
4.
Bad Debt Expense ( $ 1,000,000 x 0.75%) - $ ( 1,500 -300)
6,300
Allowance for Doubtful Accounts
6,300
5.
Utilities Expense ( $ 320 x 17 / 27)
201
Accrued Utilities Payable
201
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