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.
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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