RM Co. is in the process of closing its books for the year ended December 31, year 2. The following business events are not properly reflected in JRM’s December 31, year 2, unadjusted trial balance:
The controller determined that half of the recorded rent expense is attributed to year 3.
JRM depreciates its property, plant and equipment using the straight-line method over 10 years. The property, plant and equipment had an original cost of $20,000 and a salvage value of $5,000.
JRM uses the percentage-of-sales method to determine the addition to bad debt expense. Uncollectible accounts receivable for year 2 was estimated to be 0.25%.
On December 31, year 2, a customer declared bankruptcy and its account receivable of $855 is uncollectible.
Life insurance premium for the period ended December 31, year 2, of $650 for key members of management are included in prepaid expense.
Interest of $300 was earned and outstanding on notes receivable during year 2. The note receivable is due at the end of year 5.
Income taxes for year 2 are estimated to be $3,000.
Based on the business events above, calculate the adjustments necessary to JRM’s unadjusted trial balance by entering the appropriate debit and credit amounts in columns D and E, respectively. Enter debit adjustments as positive values and credit adjustments as negative values. If there is no adjustment needed, enter zero as the adjustment.
The amounts in column F will automatically calculate.
A B C D E F

1 Amount nameTrial balance debitTrial balance (credit)Adjustment debitAdjustment (credit)Adjusted Trial balance debit/(credit) balance
Cash 1,0000 1,000
3 Interest receivable 00 0
4 Accounts receivable 25,0000 25,000
5 Allowance for doubtful accounts0 -2,500 -2,500
6 Prepaid expenses 1,0000 1,000
7 Property, plant and equipment20,0000 20,000
8 Accumulated depreciation - property, plant and equipment0-10,000-10,000
9 Notes receivable 20,0000 20,000
10 Accounts payable 0 -33,000 -33,000
11 Taxes payable 0-1,000 -1,000
12 Equity 0-1,500 -1,500
13 Sales 0-300,000 -300,000
14 Cost of goods sold 195,000 0 195,000
15 Salaries, office, and general expenses75,0000 75,000
16 Rent expense 10,0000 10,000
17 Tax expense 1,0000 1,000
18 Bad debt expense 00 0
19 Depreciation expense 00 0
20 Insurance expense 00 0
21 Interest income 00 0
22 348000-348000000

Solution :

Account    Trial   Trial       Adjustment     Adjustment    Adjustment trial balnc

name      balnc   balnc         debit           (credit)                (debit/credit) balnc       debit   (credit)

-Cash    $1000      $0                                                             $1000

-Interest   $0         $0            $300                                         $300

receivable

-Accounts $25000  $0                              -$855                     $24145

receivable

-Allowance  $0    -$2500      $855            -$750                     -$2395

for doubt

ful accounts

-Prepaid    $1000  $0          $5000           -$650                      $5350

expenses

-property  $20000  $0                                                             $20000

plant

-depreciation $0  -$10000                        -$1500                   -$11500

property, plant

-Notes     $20000  $0                                                              $20000

receivable

-Account    $0     -$33000                                                       -$33000

payable

-Taxes       $0    -$1000                            -$2000                  -$3000

payable

-Equity      $0    -$1500                                                          -$1500

-Sales       $0    -$300000                                                      -$300000

-Cost of    $195000  $0                                                           $195000

goods sold

-Salaries,  $75000   $0                                                            $75000

offices,etc.

-Rent       $10000   $0                               -$5000                   $5000

expenses

-Tax      $1000      $0         $2000                                            $3000

expenses

-Bad debt $0       $0            $750                                               $750

expense

-Depreciation $0 $0            $1500                                           $1500

expenses

-Insurance   $0    $0            $650                                             $650

expenses

-Interest      $0    $0                                    -$300                     -$300

expenses

Total        $348000  -$348000  $11055     -$11055                      $0        

you will have $2593.74 in 10 years if you set aside $1,000 at 10%

you will have $9321.91 in 20 years if you set aside $2000 at 8%

you will have $1469.32 in 5 years if you set aside $1000 at 8%

you will have $1296.87 in 10 years if you set aside $500 at 10%

you will have $239.66 in 15 years if you set aside $100 at 6%

you will have $4660.96 in 20 years if you set aside $1000 at 8%

answer; swot analysis;