Thursday
December 18, 2014

Homework Help: Accounting

Posted by MK on Sunday, January 27, 2013 at 7:30pm.

Hello,

I’m having a difficult time understanding how to adjust the following unadjusted accounts:

A/R …………………………………..480,000
Accum. Depr, building………116,000
Accum. Depr, equipment…332,000
Advance Sales………………….324,000
Allowance for doubtful…….850
Building…………………………….665,000
Cash………………………………….213,000
Equipment……………………….1,480,000
Estimated warranty liability..1,800
Income tax expense………….154,000
Land…………………………………..348,000
Merchandise inventory……..348,000
Mortgage payable………………1,535,355
Moses Goodfish, Capital……175,095
Note payable……………………..140,000
Other operating expenses…658,000
Sales………………………………….1,849,000
Sales returns and allowances..8,100

The question I am working on is asking me to journalize the adjusting entries and then create a balance sheet. However, I’m adjusting the entries wrong. My Total Current Assets should be $769,740 – but I keep on getting $768,890.

There is some other information:
All the accounts have a normal balance
1. 75% of the balance in Advance Sales is for items to be made and delivered by 2012; the remaining 25% is from sales earned during 2011.
2. The company warranties its items against defects and estimates its warranty liability to be 3% of adjusted net sales.
3. The 5%, 5-year note payable was issued on October 1, 2011; interest is payable annually each September 30.
4. Uncollectable amounts are estimated to be 1.5% of outstanding accounts receivable
5. A physical count of inventory on hand showed a balance actually of $83,940
6. The balance in the income tax expense represents taxes accrued and paid for the 2011 year at the rate of $14,000 per month. Assume the income tax rate is 20%.
(There’s also a partial amortization schedule for the mortgage payable (2009 to 2013) – but I would use the year 2011 for this problem correct?)

Okay … so using the aforementioned information I calculated my incorrect total current assets of $768,890 by doing this:

480,000 (A/R) * 0.015 (Other Info #4) = 7,200
480,000 – 7200 – 850 (Allowance for doubtful) = 471,950
471,950 + 213,000 (Cash) + 83,940 (Merchandise Inventory other information #5)

I don’t know what I’m doing wrong, but there is clearly something that I am missing. I would be grateful for any help and I apologize that my question is so lengthy; I just wanted to get all the information out.

And due to my total current assets being wrong, my total assets are wrong and my total current liabilities are also wrong. I know that I’m not doing the proper adjusting entries for my assets. Please, any help is greatly appreciated.


Additional Details
For the year ended, Dec. 31, 2011

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