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Journalize Transaction and Adjusting entries

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The December 31, 2003 balance sheet of Pine Company had Accounts Receivable of $500,000 and a credit balance in Allowance for Doubtful Accounts of $33,000. During 2004, the following transactions occurred: sales on account $1,400,000; sales returns and allowances, $50,000; collections from customers, $1,250,000; accounts written off $35,000; previously written off accounts of $4,000 were collected.

INSTRUCTIONS

(a) Journalize the 2004 transactions.

(b) If the company uses the percentage of sales basis to estimate bad debts expense and anticipates 2% of net sales to be uncollectible, what is the adjusting entry at December 31, 2004?

(c) If the company uses the percentage of receivables basis to estimate bad debts expense and determines that uncollectible accounts are expected to be 4% of accounts receivable, what is the adjusting entry at December 31, 2004?

(d) Which basis would produce a higher net income for 2004 and by how much?

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Solution Preview

Dear student,
Solution to your posted problem is provided in a separate excel file attached herewith in the following parts as ...

Solution Summary

Solution to your posted problem is provided in a separate excel file attached herewith in the following parts as required.
(a) Journal entries for 2004
(b) Adjusting entry for Allowance for Doubtful Accounts (Percentage of Net sales method)
Working for Net sales
(c) Adjusting entry for Allowance for Doubtful Accounts (Percentage of Account Receivable method)
Working for Account Receivable balance & Allowance for Doubtful Account.
(d) statement showing Which basis would produce a higher net income for 2004 and by how much?

$2.19
See Also This Related BrainMass Solution

Journalize transaction, adjusting entry, trial balance, income

John Smith starts a sole proprietorship, Johnny's Store, on December 1, 2009. He plans to reinvest all profits in the business for the first several years.

I. Using Excel, record the following transactions in journal entry form.

1. Smith opens a bank account in the name of Johnny's Store with his personal check for $5,000
2. The company borrows $10,000 from bank on a 3-year note
3. The company prepays rent, $1,800 for 3 months
4. The company buys equipment for cash, $4,800
5. The company buys supplies on account, $800
6. The company buys merchandise on account, $3,500
7. The company sells merchandise, cost $900, for $1,450 cash
8. The company sells merchandise, cost $1,250, for $2,200 on account
9. The company pays for the supplies purchased in #5 above
10. The company receives electric bill for December, not due until January, $160

II. John wishes to have his fiscal year end on December 31st. Record the following adjusting entries in debit/credit form.

1. Accrued interest on the note (interest rate is 6% annually)
2. Depreciation on equipment (life, 10 years)
3. Expiration of one month rent
4. $75 worth of supplies were used during the month

III. Prepare a trial balance, using formulas in the cells linking to the above transactions.

IV. Prepare an income statement and balance sheet, linking cells to trial balance. Formulas must be present in excel to perform the mathematical functions.

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