Question

The trial balance follows of the Larkspur, Inc. as at December 31. The books are closed annually on December 31.

Larkspur, Inc. Trial Balance December 31
		Debit		Credit
Cash		$112,500
Accounts receivable		63,000
Allowance for doubtful accounts				$8,850
Land		347,000
Buildings		582,000
Accumulated depreciation—buildings				38,000
Equipment		315,000
Accumulated depreciation—equipment				123,500
Prepaid insurance		10,000
Common shares				867,670
Retained earnings				151,000
Sales revenue				412,500
Rent revenue				44,880
Utilities expense		74,600
Salaries and wages expense		89,300
Repairs and maintenance expense		53,000
		$1,646,400		$1,646,400

Instructions: A)Enter the balances in ledger accounts.

B) From the trial balance and the information that follows, prepare annual adjusting entries.

1.		The buildings have an estimated life of 30 years with no residual value. (The company uses the straight-line method.)
2.		The equipment is depreciated at 10% of its year-end carrying value per year.
3.		Insurance expired during the year was $5,300.
4.		The rental revenue is the amount received for 11 months for dining facilities. The December rent of $4,080 has not yet been received. A Rent Receivable account is used.
5.		It is estimated that 20% of the accounts receivable will be uncollectible.
6.		Salaries and wages earned but not paid by December 31 amounted to $3,730.
7.		Sales revenue included dues paid in advance by members and totalled $9,550.

C) Post annual adjusting entries to the ledger accounts: (Post entries in the order of journal entries presented in the previous part.)

Answer 1

Adjusting Entries:

Event	General Journal	DEBIT	CREDIT
1	Depreciation Expense [582000/30]	$           19,400
	Accumulated Depreciation-Building		$           19,400
	(To record depreciation expense)
2	Depreciation Expense [(315000-132500)/10]	$           19,150
	Accumulated Depreciation-Equipment		$           19,150
	(To record depreciation expense)
3	Insurance Expense	$             5,300
	Prepaid Insurance		$              5,300
	(To record insurance expense recorded)
4	Rent Receivable	$             4,080
	Rent revenue		$              4,080
	(To record rental revenue)
5	Bad Debts Expense[(63000*20%)-8850]	$             3,750
	Allowance for Doubtful Debts		$              3,750
	(To record bad debt expense)
6	Salaries Expense	$             3,730
	Salaries payable		$              3,730
	(To record salary expense)
7	Unearned Sale Revenue	$             9,550
	Sale Revenue		$              9,550
	(To record revenue unearned)

Ledger Accounts:

Depreciation Expense
1	$ 19,400
2	$ 19,150
End Balance	$ 38,550
Accumulated Depreciation-Building
		Beg. Bal	$    38,000
		1	$    19,400
		End Balance	$    57,400
Accumulated Depreciation-Equipment
		Beg. Bal	$ 123,500
		2	$    19,150
		End Balance	$ 142,650
Insurance Expense
3	$    5,300
End Balance	$    5,300
Prepaid Insurance
Beg. Bal.	$ 10,000	3	$      5,300
End Balance	$    4,700
Rent Receivable
4	$    4,080
End Balance	$    4,080
Rent revenue
		Bal.	$    44,880
		4	$      4,080
		End Balance	$    48,960
Bad debt Expense
5	$    3,750
End Balance	$    3,750
Allowance for Doubtful Debts
		Bal.	$      8,850
		5	$      3,750
		End Balance	$    12,600
Salaries and wages expense
Bal.	$ 89,300
6	$    3,730
End Balance	$ 93,030
Salaries payable
		6	$      3,730
		End Balance	$      3,730
Unearned Sales Revenue
7	$    9,550
		End Balance	$             -
Sale Revenue
		Bal.	$ 412,500
		7	$      9,550
		End Balance	$ 422,050