Comprehensive Problem 11 (CP11)
Bug-Off Exterminators provides pest control services and sells extermination products manufactured by other companies. The following six-column table...
BUG-OFF EXTERMINATORS
December 31, 2011
Unadjusted Trial Balance
Cash 18,000
Accounts receivable 5,000
Allowance for doubtful accounts 928
Merchandise inventory 12,700
Trucks 40,000
Accum. depreciation-Trucks -
Equipment 55,000
Accum. depreciation-Equipment 14,400
Accounts payable 4,800
Estimated warranty liability 1,400
Unearned services revenue -
Interest payable -
Long-term notes payable 15,000
D. Buggs, Capital 62,600
D. Buggs, Withdrawals 10,000
Extermination services revenue 70,000
Interest revenue 872
Sales (of merchandise) 80,000
Cost of goods sold 57,991
Depreciation expense-Trucks -
Depreciation expense-Equipment -
Wages expense 32,500
Interest expense -
Rent expense 10,000
Bad debts expense -
Miscellaneous expense 1,338
Repairs expense 671
Utilities expense 6,800
Warranty expense -
Totals 250,000 250,000
The following information in a through h applies to the company at the end of the current year.
a. The bank reconciliation as of December 31, 2011, includes the following facts.
Cash balance per bank 16,100
Cash balance per books 18,000
Outstanding checks 1,800
Deposit in transit 1,450
Interest earned (on bank account) 52
Bank service charges (miscellaneous expense) 15
Reported on the bank statement is a canceled check that the company failed to record.
b. An examination of customers' accounts shows that accounts totaling $779 should be written off as uncollectible. Using an aging of receivables....
c. A truck is purchased and placed in service on January 1, 2011. Its cost is being depreciated....
Original cost 40,000
Expected salvage value 5,000
Useful life (years) 5
d. Two items of equipment (a sprayer and an injector) were purchased and put into service in early January 2009.
e. On August 1, 2011, the company is paid $7,680 cash in advance to provide monthly service for an apartment complex for one year.
f. The company offers a warranty for the services it sells. The expected cost of providing warranty service is 2.5% of the extermination...
g. The $15,000 long-term note is an 8%, 5-year, interest-bearing note with interest payable annually on December 31...
h. The ending inventory of merchandise is counted and determined to have a cost of $12,700.
Required:
1. Use the preceding information to determine amounts for the following items.
a. Correct (reconciled) ending balance of Cash, and the amount of the omitted check.
b. Adjustment needed to obtain the correct ending balance of the Allowance for Doubtful Accounts.
c. Depreciation expense for the truck used during year 2011.
d. Depreciation expense for the two items of equipment used during year 2011.
e. The adjusted 2011 ending balances of the Extermination Services Revenue and Unearned Services Revenue accounts.
f. The adjusted 2011 ending balances of the accounts for Warranty Expense and Estimated Warranty Liability.
g. The adjusted 2011 ending balances of the accounts for Interest Expense and Interest Payable.
2. Use the results of part 1 to complete the six-column table
3. Prepare journal entries to record the adjustments entered on the six-column table.
4.1 Prepare a single-step income statement for year 2011.
4.2 Prepare a Statement of owner's equity for year 2011.
4.3 Prepare a Classified balance sheet as at 2011.
Tutorial: CP11 - Bug-Off Exterminators
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