Question

A.
1)

August 6: Pane purchases land with cash. At the time of purchase, Pane also had to pay for survey fees and costs to demolish a building on the land.							9
		Cost of Land		$345,000
		Demolish Building		$2,000
		Survey Fees		$300

2)

On December 31, Pane was notified that their one of their customers filed bankruptcy and would not be able to pay off their $2,000 account receivable.

3)

March 12: Pane purchased a one year insurance policy with coverage beginning on April 1.
		Insurance Policy		$40,000

B . Record closing journal entries for the previous entries

Recognize the expiration of the prepaid insurance policy.

Record bad debt expense for the year, assuming uses 2% of accounts receivable to estimate their uncollectible accounts.

Answer 1

A	Date/Event	General Journal	Debit	Credit
	1	Land	347,300
		Cash (345,000 + 2,000 + 300)		347,300
		(Recorded Land purchase)
	2	Allowance for Doubtful Account	2,000
		Accounts Receivable		2,000
		(Customers filed bankruptcy and not able to pay $2,000 recorded)
	3	Prepaid Insurance	40,000
		Cash		40,000
		(Recorded Insurance policy purchase)
B	1	Insurance Expenses	30,000
		Prepaid Insurance (40,000 x 9/12)		30,000
	2	Bad Debts
		Allowance for Doubtful Account