Presented below is the December 31 trial balance of New York Boutique. New York BoutiqueTrial BalanceDecember 31 Debit Credit Cash $ 18,500 Accounts Receivable 32,000 Allowance for Doubtful Accounts $ 700 Inventory, December 31 80,000 Prepaid Insurance 5,100 Equipment 84,000 Accumulated Depreciation—Equipment 35,000 Notes Payable 28,000 Common Stock 80,600 Retained Earnings 10,000 Sales Revenue 600,000 Cost of Goods Sold 408,000 Salaries and Wages Expense (sales) 50,000 Advertising Expense 6,700 Salaries and Wages Expense (administrative) 65,000 Supplies Expense 5,000 000,000 $754,300 $754,300 Instructions a. Construct T-accounts and enter the balances shown. b. Prepare adjusting journal entries for the following and post to the T-accounts. (Omit explanations.) Open additional T-accounts as necessary. (The books are closed yearly on December 31.) 1. Bad debt expense to be recorded is $1,400. 2. Equipment is depreciated based on a 7-year life (no salvage value). 3. Insurance expired during the year $2,550. 4. Interest accrued on notes payable $3,360. 5. Sales salaries and wages earned but not paid $2,400. 6. Advertising paid in advance $700. 7. Office supplies on hand $1,500, charged to Supplies Expense when purchased. c. Prepare closing entries and post to the accounts.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Presented below is the December 31
| New York Boutique Trial Balance December 31 |
||||
| Debit | Credit | |||
| Cash | $ 18,500 | |||
| 32,000 | ||||
| Allowance for Doubtful Accounts | $ 700 | |||
| Inventory, December 31 | 80,000 | |||
| Prepaid Insurance | 5,100 | |||
| Equipment | 84,000 | |||
| 35,000 | ||||
| Notes Payable | 28,000 | |||
| Common Stock | 80,600 | |||
| 10,000 | ||||
| Sales Revenue | 600,000 | |||
| Cost of Goods Sold | 408,000 | |||
| Salaries and Wages Expense (sales) | 50,000 | |||
| Advertising Expense | 6,700 | |||
| Salaries and Wages Expense (administrative) | 65,000 | |||
| Supplies Expense | 5,000 | 000,000 | ||
| $754,300 | $754,300 |
Instructions
a. Construct T-accounts and enter the balances shown.
b. Prepare
1.
2. Equipment is depreciated based on a 7-year life (no salvage value).
3. Insurance expired during the year $2,550.
4. Interest accrued on notes payable $3,360.
5. Sales salaries and wages earned but not paid $2,400.
6. Advertising paid in advance $700.
7. Office supplies on hand $1,500, charged to Supplies Expense when purchased.
c. Prepare closing entries and post to the accounts.
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c. Prepare closing entries and post to the accounts.
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