Comprehensive Problem Bug Off Exterminators

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

Bug Off Exterminators December 31, 2013 Unadjusted Trial Balance
Cash	$17, 900
Accounts Receivable	4,500
Allowance for doubtful accounts		$813
Merchandise inventory	13,600
Trucks	31, 860
Accum. Depreciation-Equipment		0
Accounts Payable		5400
Estimated warranty liability		1390
Unearned services revenue		0
Interest Payable		0
Long-term notes payable		13, 100
D. Buggs, Capital		68,622
D. Buggs, Withdrawals	11, 700
Extermination services revenue		59, 030
Interest Revenue		853
Sales (Of merchandise)		72, 326
Cost of Goods Sold	47, 100
Depreciation expense-Trucks	0
Depreciation expense-Equipment	0
Wages Expense	35,500
Interest Expense	0
Rent Expense	10, 400
Bad debts expense	0
Misc. Expense	1,244
Repairs expense	8, 400
Utilities Expense	5, 900
Warranty Expense	0
Totals	$234, 9934	$234, 934

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, 2013, includes the following facts:

Cash balance per bank	13, 500
Cash balance per books	17, 900
Outstanding checks	1, 820
Deposit in transit	2,420
Interest earned (on bank account)	39
Bank service charges (misc. expense)	24

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 $672 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 $715.

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, 860
Expected Salvage Value	7,300
Useful Life	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.

Original Cost	$28, 180	$18,650
Expected Salvage Value	3,700	2,700
Useful Life (years)	8	5

e. On August 1, 2013, the company is paid $3,720 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.

E. 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 $56,860 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.

F. The $13,100 long-term note is an 9%, 5-year, interest-bearing note with interest payable annually on December 31. The note was signed with First National Bank on December 31, 2013.

G. The ending inventory of merchandise is counted and determined to have a cost of $13,600. 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

Reconciled Balance
Omitted Check

b. Adjustment needed to obtain the correct ending balance of the Allowance for Doubtful Accounts.

Necessary Adjustment

C. Depreciation expense for the truck used during year 2013.

Depreciation expense

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

	Sprayer	Injector
Depreciation Expense

E. The adjusted 2013 ending balances for the Extermination Services Revenue and Unearned Services Revenue Accounts (Do not round your intermediate calculations)

	Services Revenue	Unearned Services Revenue
Ending balances after adjustment

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

	Warranty Expense	Estimated Warranty Liability
Ending Balances after Adjustment

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

	Interest Expense	Interest Payable
Ending balances after adjustment