4.2

Bug-Off Exterminators provides pest control services and sells extermination products manufactured by other companies. Following is the company's unadjusted trial balance as of December 31, 2013.

BUG-OFF EXTERMINATORS

December 31, 2013

Unadjusted Trial Balance

Cash

$

16,300

Accounts receivable

5,600

Allowance for doubtful accounts

$

827

Merchandise inventory

13,200

Trucks

31,520

Accum. depreciationTrucks

0

Equipment

48,050

Accum. depreciationEquipment

13,300

Accounts payable

5,900

Estimated warranty liability

1,340

Unearned services revenue

0

Interest payable

0

Long-term notes payable

13,300

D. Buggs, Capital

65,889

D. Buggs, Withdrawals

10,300

Extermination services revenue

60,250

Interest revenue

867

Sales (of merchandise)

72,426

Cost of goods sold

48,000

Depreciation expenseTrucks

0

Depreciation expenseEquipment

0

Wages expense

35,400

Interest expense

0

Rent expense

9,300

Bad debts expense

0

Miscellaneous expense

1,229

Repairs expense

9,500

Utilities expense

5,700

Warranty expense

0

Totals

$

234,099

$

234,099

The following information inathroughhapplies to the company at the end of the current year.

a.

The bank reconciliation as of December 31, 2013, includes the following facts.

Cash balance per bank

$

14,900

Cash balance per books

16,300

Outstanding checks

1,900

Deposit in transit

2,350

Interest earned (on bank account)

34

Bank service charges (miscellaneous expense)

25

Reported on the bank statement is a canceled check that the company failed to record. (Information from the bank reconciliation allows you to determine the amount of this check, which is a payment on an account payable.)

b.

An examination of customers accounts shows that accounts totaling $673 should be written off as uncollectible. Using an aging of receivables, the company determines that the ending balance of the Allowance for Doubtful Accounts should be $713.

c.

A truck is purchased and placed in service on January 1, 2013. Its cost is being depreciated with the straight-line method using the following facts and estimates.

Original cost

$

31,520

Expected salvage value

7,400

Useful life (years)

4

d.

Two items of equipment (a sprayer and an injector) were purchased and put into service in early January 2011. They are being depreciated with the straight-line method using these facts and estimates.

Sprayer

Injector

Original cost

$

28,400

$

19,650

Expected salvage value

3,600

3,200

Useful life (years)

8

5

e.

On August 1, 2013, the company is paid $4,440 cash in advance to provide monthly service for an apartment complex for one year. The company began providing the services in August. When the cash was received, the full amount was credited to the Extermination Services Revenue account.

f.

The company offers a warranty for the services it sells. The expected cost of providing warranty service is 1.5% of the extermination services revenue of $57,660 for 2013. No warranty expense has been recorded for 2013. All costs of servicing warranties in 2013 were properly debited to the Estimated Warranty Liability account.

g.

The $13,300 long-term note is an 8%, 5-year, interest-bearing note with interest payable annually on December 31. The note was signed with First National Bank on December 31, 2013.

h.

The ending inventory of merchandise is counted and determined to have a cost of $13,200. Bug-Off uses a perpetual inventory system.

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 2013.

d.

Depreciation expense for the two items of equipment used during year 2013.

e.

The adjusted 2013 ending balances of the Extermination

Services Revenue and Unearned Services Revenue accounts.(Do not round your intermediate calculations.)

f.

The adjusted 2013 ending balances of the accounts for Warranty Expense and Estimated Warranty Liability.

g.

The adjusted 2013 ending balances of the accounts for Interest Expense and Interest Payable.

2.

Use the results of part 1 to complete the six-column table by first entering the appropriate adjustments for itemsathroughgand then completing the adjusted trial balance columns. (Hint: Itembrequires two adjustments.)(Do not round your intermediate calculations.)

BUG-OFF EXTERMINATORS

December 31, 2013

Unadjusted Trial Balance

Adjustments

Adjusted Trial Balance

Account Title

Debit

Credit

Debit

Credit

Debit

Credit

Debit/credit

Cash

$16,300

Accounts receivable

5,600

Allowance for doubtful accounts

$827

Merchandise inventory

13,200

Trucks

31,520

Accum. deprec.Trucks

0

Equipment

48,050

Accum. deprec.Equip

13,300

Accounts payable

5,900

Estim. warranty liability

1,340

Unearned services rev

0

Interest payable

0

Long-term notes payable

13,300

D. Buggs, Capital

65,889

D. Buggs, Withdrawals

10,300

Extermination services revenue

60,250

Interest revenue

867

Sales

72,426

Cost of goods sold

48,000

Deprec. expenseTrucks

0

Deprec. expenseEquip

0

Wages expense

35,400

Interest expense

0

Rent expense

9,300

Bad debts expense

0

Miscellaneous expense

1,229

Repairs expense

9,500

Utilities expense

5,700

Warranty expense

0

Totals

$234,099

$234,099

$0

$0

$0

$0

+

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3.

Prepare journal entries to record the adjustments entered on the six-column table. Assume Bug-Offs adjusted balance for Merchandise Inventory matches the year-end physical count. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field. Do not round your intermediate calculations.)

A

B

C

D

Transaction

General Journal

Debit

Credit

1

(a)

Miscellaneous expenses

2

Accounts payable

3

Interest revenue

4

Cash

5

6

(b1)

Allowance for doubtful accounts

7

Accounts receivable

8

9

(b2)

Bad debts expense

10

Allowance for doubtful accounts

11

12

(c)

Depreciation expenseTrucks

13

Accumulated depreciationTrucks

14

15

(d)

Depreciation expenseEquipment

16

Accumulated depreciationEquipment

17

18

(e)

Extermination services revenue

19

Unearned services revenue

20

21

(f)

Warranty expense

22

Estimated warranty liability

23

24

(g)

No journal entry required

no

no

no

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Prepare a statement of owners equity (cash withdrawals during 2013 were $10,300) for year 2013 and there were no investments by the owner in the current year.

BUG-OFF EXTERMINATORS

Statement of Owners Equity

For Year Ended December 31, 2013

D. Buggs, Capital, December 31, 2012

Add: Net income

0

Less: Withdrawals by owner

D. Buggs, Capital, December 31, 2013

$0

+

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4.3

Prepare a Classified balance sheet as at 2013.(Negative amounts should be indicated by a minus sign. Do not round your intermediate calculations.)

Estimated warranty liability

BUG-OFF EXTERMINATORS

Balance Sheet

December 31, 2013

Assets

Current assets:

Cash

Accounts receivable

Allowance for doubtful accounts

0

Merchandise inventory

Total current assets

0

Plant assets:

Trucks

Accum. depreciationTrucks

0

Equipment

Accum. depreciationEquipment

0

Total plant assets

0

Total assets

$0

Liabilities

Current liabilities:

Accounts payable

Estimated warranty liability

Unearned services revenue

Total current liabilities

$0

Long-term liabilities:

Long-term notes payable

Total liabilities

0

Equity

D. Buggs, Capital

Total liabilities and equity

$0

+

Accounts payable

Accounts receivable

Accum. depreciationEquipment

Accum. depreciationTrucks

Allowance for doubtful accounts

Bad debts expense

Cash

Cost of goods sold

D. Buggs, Capital

D. Buggs, Withdrawals

Depreciation expenseEquipment

Depreciation expenseTrucks

Equipment

Estimated warranty liability

Extermination services revenue

Interest expense

Interest payable

Interest revenue

Long-term notes payable

Merchandise inventory

Miscellaneous expenses

Rent expense

Repairs expense

Sales

Trucks

Unearned services revenue

Utilities expense

Wages expense

warranty expense

please answer 2, 3 and 4 I posted this question before and am having trouble with the formatting if this doesn't post properly please refer to the question I posted a few days ago. thank you!