Question: The unadjusted trial balance of Clancy Inc at December 31

The unadjusted trial balance of Clancy Inc. at December 31, 2014, is as follows:
Additional information:
1. Actual advertising costs amounted to$1,500 per month. The company has already paid for advertisements in Montezuma Magazine for the first quarter of201 5.
2. The building was purchased and occupied on January I, 2012, with an estimated useful life of 20 years, and residual value of$30,000. (The company uses straight-line depreciation.)
3. Prepaid insurance contains the premium costs of several policies including Policy A, cost of $2,640, one-year term, taken out on September I, 2014; and Policy B, cost ofSI,980, three-year term, taken out on April1, 2014.
4. A portion of Clancy's building has been converted into a snack bar that has been rented to the Ono Food Corp. since July I, 2013, at a rate of $7,200 per year payable each July I.
5. One of the company's customers declared bankruptcy on December 30, 2014. It is now certain that the $2,700 the customer owes will never be collected. This fact has not been recorded. In addition, Clancy estimates that 4% of the Accounts Receivable balance on December 31, 2014, will become uncollectible.
6. An advance of $600 to a salesperson on December 31, 2014, was charged to Salaries and Wages Expense.
7. On November I, 2012, Clancy issued 180 $ 1,000 bonds at par value. Interest is paid semi-annually on April 30 and
October 31.
8. The equipment was purchased on January 1, 2012, with an estimated useful life of 12 years, and no residual value.
(The company uses straight-line depreciation.)
9. On August I, 2014, Clancy purchased at par value 40 $1,000, 9% bonds maturing on July 31, 2016. Interest is paid on July 31 and January 31.
10. The inventory on hand at December 31, 2014, was $90,000 after a physical inventory count.
(a) Prepare adjusting and correcting entries for December 31,2014, using the information given. Record the adjusting entry for inventory using a Cost of Goods Sold account.
(b) Indicate which of the adjusting entries could be reversed.

View Solution:

Sale on SolutionInn
  • CreatedSeptember 18, 2015
  • Files Included
Post your question