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    Adjusting and Reversing Entries

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    Problem II ? Adjusting and Reversing Entries.
    The following list of accounts and their balances represents the unadjusted trial balance of Alt Company at December 31, 2004:
    Cash $ 32,690
    Short-term Investment 70,000
    Accounts Receivable 69,000
    Allowance for Doubtful Accounts $ 500
    Merchandise Inventory 54,720
    Prepaid Rent 30,000
    Plant and Equipment 156,000
    Accumulated Depreciation 14,740
    Accounts Payable 11,370
    Bonds Payable 90,000
    Common Stock 170,000
    Retained Earnings 97,180
    Sales 218,400
    Cost of Goods Sold 154,400
    Transportation-Out 11,000
    Salaries and Wages Expense 32,000
    Interest Expense 2,040
    Rent Revenue 18,000
    Miscellaneous Expense 890
    Insurance Expense 7,450
    $620,190 $620,190
    Additional Data:
    1. The balance in the Insurance Expense account contains the premium costs of three policies:
    Policy 1, remaining cost of $2,550, 1-yr. term, taken out on May 1, 2003;
    Policy 2, original cost of $3,600, 3-yr. term, taken out on Oct. 1, 2004;
    Policy 3, original cost of $1,300, 1-yr. term, taken out on Jan. 1, 2004.

    2. On September 30, 2004, Alt received $18,000 rent from its lessee for an eighteen month lease beginning on that date.

    3. The regular rate of depreciation is 10% per year. Acquisitions and retirements during a year are depreciated at half this rate. There were no purchases during the year. On December 31, 2003, the balance of the Plant and Equipment account was $260,000.

    4. On December 28, 2004, the bookkeeper incorrectly credited sales for a receipt on account in the amount of $10,000.

    5. At December 31, 2004, salaries accrued but unpaid were $4,200.

    6. Alt estimates that 2% of sales will become uncollectible.

    7. On August 1, 2004, Alt purchased, as a short-term investment, 70 $1,000, 9% bonds of Allen Corp. at par. The bonds mature on August 1, 2005. Interest payment dates are July 31 and January 31.

    8. On April 30, 2004, Alt rented a warehouse for $2,500 per month, paying $30,000 in advance.

    Instructions
    (a) Record the necessary correcting and adjusting entries.
    (b) Indicate which of the adjusting entries may be reversed at the beginning of the next accounting period.

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    https://brainmass.com/business/the-adjusting-process/adjusting-and-reversing-entries-112186

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    Problem II ? Adjusting and Reversing Entries.

    The following list of accounts and their balances represents the unadjusted trial balance of Alt Company at December 31, 2004:
    Cash $ 32,690
    Short-term Investment 70,000
    Accounts Receivable 69,000
    Allowance for Doubtful Accounts $ 500
    Merchandise Inventory 54,720
    Prepaid Rent 30,000
    Plant and Equipment 156,000
    Accumulated Depreciation 14,740
    Accounts Payable 11,370
    Bonds Payable 90,000
    Common Stock 170,000
    Retained Earnings 97,180
    Sales 218,400
    Cost of Goods Sold 154,400
    Transportation-Out 11,000
    Salaries and Wages Expense 32,000
    Interest Expense 2,040
    Rent Revenue 18,000
    Miscellaneous Expense 890
    Insurance Expense 7,450
    $620,190 $620,190
    Additional Data:

    Instructions
    (a) Record the necessary correcting and adjusting entries.

    1. The balance in the ...

    Solution Summary

    This solution is comprised of a detailed explanation to record the necessary correcting and adjusting entries and indicate which of the adjusting entries may be reversed at the beginning of the next accounting period.

    $2.19

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