Question

The Scooter Warehouse provided the following information at December 31, 2013:

Bank Reconciliation
General ledger cash        balance, 12/31/13		$	17,566			Bank statement balance,        12/31/13		$	16,306
Bank service charge			(25	)		Deposits in transit			2,450
Returned customer checks        marked NSF			(375	)		Outstanding checks			(1,356	)
Error in recording of office      supplies			234
Adjusted cash balance,       12/31/13		$	17,400			Adjusted cash balance,       12/31/13		$	17,400

Investment in securities

The company invested $26,000 in a portfolio of investment in securities on December 22, 2013. The portfolio's market value on December 31, 2013, had increased in value to $28,500.

Notes Receivable

On November 1, 2013, The Scooter Warehouse sold 25 scooters to Bermuda Fantasy Resort for $65,000. The resort paid $5,000 at the point of sale and issued a one-year, $60,000, 5 percent note for the remaining balance. The note, plus accrued interest, is due in full on October 31, 2014. The Scooter Warehouse adjusts for accrued interest revenue monthly.

Accounts Receivable

The Scooter Warehouse uses a statement of financial position approach to account for impairment loss of receivable. Outstanding accounts receivable on December 31, 2013, total $450,000. After aging these accounts, the company estimates that their estimated collectible amount is $435,000. Prior to making any adjustment to record impairment loss, The Scooter Warehouse's Allowance for Impairment has a credit balance of $4,000.

a.	Prepare the journal entry necessary to update the company's accounts immediately after performing its bank reconciliation on December 31, 2013. (Omit the "$" sign in your response.)

Date	General Journal	Debit	Credit
Dec. 31	(Click to select)Accounts receivableInvestments in securitiesImpairment loss of receivableCashAccounts payableOffice suppliesBank service chargesInterest receivable
	(Click to select)Office suppliesInterest receivableBank service chargesImpairment loss of receivableInvestments in securitiesAccounts payableCashAccounts receivable
	(Click to select)Bank service chargesImpairment loss of receivableAccounts receivableInterest receivableInvestments in securitiesCashOffice suppliesAccounts payable
	(Click to select)Office suppliesInvestments in securitiesBank service chargesImpairment loss of receivableAccounts receivableCashAccounts payableInterest receivable

b.	Prepare the journal entry necessary to adjust the company's investment in securities to market value at December 31, 2013. (Omit the "$" sign in your response.)

Date	General Journal	Debit	Credit
Dec. 31	(Click to select)Bank serivce chargeOffice suppliesInterest revenueAccounts receivableInvestments in securitiesCashInterest receivableUnrealized holding gain on investments
	(Click to select)Interest receivableBank serivce chargeInvestments in securitiesAccounts receivableOffice suppliesInterest revenueUnrealized holding gain on investmentsCash

   

c.	Prepare the journal entry necessary to accrue interest in December 2013. (Do not round intermediate calculations. Omit the "$" sign in your response.)

                    

Date	General Journal	Debit	Credit
Dec. 31	(Click to select)Accounts receivableCashInterest revenueAccounts payableBank serivce chargesAllowance for ImpairmentOffice suppliesInterest receivable
	(Click to select)Accounts receivableBank serivce chargesInterest revenueOffice suppliesAccounts payableCashInterest receivableAllowance for Impairment

   

d.	Prepare the journal entry necessary to report the company's accounts receivable at their estimated collectible amount at December 31, 2013. (Omit the "$" sign in your response.)

Date	General Journal	Debit	Credit
Dec. 31	(Click to select)Interest revenueAllowance for ImpairmentAccounts payableOffice suppliesAccounts receivableBank serivce chargesInterest receivableImpairment loss of receivable
	(Click to select)Interest receivableBank serivce chargesAccounts receivableInterest revenueAccounts payableAllowance for ImpairmentOffice suppliesImpairment loss of receivable

Answer 1

a.

Account Titles	Debit	Credit
Bank Service Charge	$                    25
Accounts Receivable	$                 375
Office Supplies		$                 234
Cash		$                 166

b.

Account Titles	Debit	Credit
Investment in Securities	$              2,500
Unrealized Holding Gain on investments		$             2,500

Fair Value Adjustment = $28500-26000 = $2500

c.

Account Titles	Debit	Credit
Interest Receivable	$                 500
Interest Revenue		$                 500

Interest = $60000 x 5% x 2/12 = $500

d.

Account Titles	Debit	Credit
Bad Debt Expense	$           11,000
Allowance for Impairement		$           11,000

Bad Debt Expense = $450000 - 435000 - 4000