The following information is available December 31, 2020: (i) Store Supplies on hand on December 31, 2020, amounted to $255,500. (ii) Insurance of $2,775,000 was paid on January 1, 2020, for the 15-months to March 31, 2021 (iii) Prepaid rent expired December 31, 2020, amounts to $850,000 (iv) The furniture and fixtures have an estimated useful life of 10 years and is being depreciated on the straight-line method down to a residual value of $50,000. (v) The machinery cost includes two coffee drink machines purchased for $900,000 each by the company on January 1, 2014. The double-declining balance method of depreciation is used to compute the machinery’s depreciation charges and their expected useful life is 10 years or 100,000 drinks. In 2014, 5,000 drinks were sold,  6,500 in 2015, 7,800 in 2016, 9,000 in 2017, 11,500 in 2018,  12,800 in 2019 15,900 sold in 2020. The residual value on both machines is $96,637 each. On September 1, 2020, the company sold one of the coffee drinks machines for $480,000 cash.   (vi) Salaries earned by employees and not yet paid amounted to $180,000 on Dec 31, 2020. (vii) Accrued interest expense as of December 31, 2020, $98,000. (viii) On Dec 31, 2020, $695,000 of the previously unearned sales revenue had been earned (ix) The aging of the Accounts Receivable schedule on Dec 31, 2020, indicated that the Allowance for Bad Debts should be $371,000   (x) A physical count of inventory was done on December 31, 2020, after making all the other adjustments and this revealed that there was $2,400,000 worth of inventory on hand at this point. Other data: (xi) The business is expected to make principal payments totaling $400,000 towards the loan during the fiscal year to December 31,2021. Account Names Trial Balance   Dr Cr Cash 560,000   Accounts receivable 3,710,000   Allowance for bad debt   290,000 Merchandise Inventory 2,580,000   Store Supplies 1,300,000   Prepaid Insurance 2,775,000   Prepaid Rent 1,000,000   Furniture 2,650,000   Accumulated Depreciation-Furniture   2,080,000 Machinery 1,800,000   Accumulated Depreciation-Machinery   1,328,141 Accounts Payable   630,000 Salary Payable     Interest Payable     Unearned Sales Revenue   800,000 Note Payable, Long Term   2,500,000 Patty Patterson, Capital   5,200,000 Patty Patterson, Withdrawals 280,000   Sales Revenue   22,726,859 Sales Discount 1,200,000   Sales Returns and Allowances 800,000   Cost of Goods Sold 8,100,000   Salaries Expense 7,270,000   Insurance Expense     Utilities Expense 580,000   Rent Expense 950,000   Depreciation Expense – Furniture     Depreciation Expense – Machinery     Store Supplies-Expense     Gain on Disposal of Machinery     Bad-Debt Expense     Interest Expense       35,555,000 35,555,000   Required: a) Prepare the necessary adjusting journal entries on Dec 31, 2020.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The following information is available December 31, 2020:

(i) Store Supplies on hand on December 31, 2020, amounted to $255,500.

(ii) Insurance of $2,775,000 was paid on January 1, 2020, for the 15-months to March 31,

2021

(iii) Prepaid rent expired December 31, 2020, amounts to $850,000

(iv) The furniture and fixtures have an estimated useful life of 10 years and is being depreciated on the straight-line method down to a residual value of $50,000.

(v) The machinery cost includes two coffee drink machines purchased for $900,000 each by

the company on January 1, 2014. The double-declining balance method of depreciation is used to compute the machinery’s depreciation charges and their expected useful life is 10 years or 100,000 drinks.

In 2014, 5,000 drinks were sold,

 6,500 in 2015,

7,800 in 2016,

9,000 in 2017,

11,500 in 2018,

 12,800 in 2019

15,900 sold in 2020.

The residual value on both machines is $96,637 each. On September 1, 2020, the company sold one of the coffee drinks machines for $480,000 cash.

 

(vi) Salaries earned by employees and not yet paid amounted to $180,000 on Dec 31, 2020.

(vii) Accrued interest expense as of December 31, 2020, $98,000.

(viii) On Dec 31, 2020, $695,000 of the previously unearned sales revenue had been earned

(ix) The aging of the Accounts Receivable schedule on Dec 31, 2020, indicated that the Allowance for Bad Debts should be $371,000

 

(x) A physical count of inventory was done on December 31, 2020, after making all the other adjustments and this revealed that there was $2,400,000 worth of inventory on hand at this point.

Other data:

(xi) The business is expected to make principal payments totaling $400,000 towards the

loan during the fiscal year to December 31,2021.

Account Names

Trial Balance

 

Dr

Cr

Cash

560,000

 

Accounts receivable

3,710,000

 

Allowance for bad debt

 

290,000

Merchandise Inventory

2,580,000

 

Store Supplies

1,300,000

 

Prepaid Insurance

2,775,000

 

Prepaid Rent

1,000,000

 

Furniture

2,650,000

 

Accumulated Depreciation-Furniture

 

2,080,000

Machinery

1,800,000

 

Accumulated Depreciation-Machinery

 

1,328,141

Accounts Payable

 

630,000

Salary Payable

 

 

Interest Payable

 

 

Unearned Sales Revenue

 

800,000

Note Payable, Long Term

 

2,500,000

Patty Patterson, Capital

 

5,200,000

Patty Patterson, Withdrawals

280,000

 

Sales Revenue

 

22,726,859

Sales Discount

1,200,000

 

Sales Returns and Allowances

800,000

 

Cost of Goods Sold

8,100,000

 

Salaries Expense

7,270,000

 

Insurance Expense

 

 

Utilities Expense

580,000

 

Rent Expense

950,000

 

Depreciation Expense – Furniture

 

 

Depreciation Expense – Machinery

 

 

Store Supplies-Expense

 

 

Gain on Disposal of Machinery

 

 

Bad-Debt Expense

 

 

Interest Expense

 

 

 

35,555,000

35,555,000

 

Required:

a) Prepare the necessary adjusting journal entries on Dec 31, 2020.

 

 

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