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Ben Cartwright Pest Control uses   following ledgers in its chart of accounts 107. Accounts Receivable                  105.Accumulated...

Ben Cartwright Pest Control uses   following ledgers in its chart of accounts

107. Accounts Receivable                  105.Accumulated Depreciation – Equipment   104. Spraying Equipment

201. Interest Payable                          209. Notes Payable                                                103. Prepaid Insurance      

205. Salaries Payable                          104 .Supplies                                                           208.Unearned Service Revenue

509. Depreciation Expense                405. Service Revenue                                            534. Interest Expense

510. Salary Expense                            518. Insurance   Expense                                       520. Supplies Expense      

All of the accounts have normal balances. The information below has been gathered at December 31, 2019.

  1. The Cost of Equipment is $84,000 and life is estimated to be 5 years
  2. Ben Cartwright Pest Control borrowed $ 24,000 by signing a 10%, one-year note on July 1, 2019, Interest is paid on the maturity of loan.
  3. Ben Cartwright Pest Control paid $ 3,600 for 8 months of insurance coverage on October 1, 2019.
  4. Salaries of Employees due on Dec-31, 2019 amounting $ 5,000 which is not paid yet.
  5. Ben Cartwright Pest Control performed disinfecting services worth $3,000. For a client in December 2019. The client is billed for these services but no cash is received yet.
  6. On December 31, 2019, Ben Cartwright Pest Control provides services worth $7,000 to customers whom cash has been received in Advance.               
  7. Supplies $ 2,000 was purchased at the beginning of December, however a count of supplies on December 31, 2019, indicates that supplies of $ 950 are on hand.

Required:

  1. Prepare in Journal form with narration, the adjusting entries for the seven items listed for Ben Cartwright Pest Control, keeping in mind the company has a policy of adjusting accounts on Monthly basis.

  1. What would be the entry in case of a, b and c if Ben has a policy of adjusting accounts on yearly basis and the accounting year of Ben ends on December-31.

Solutions

Expert Solution

I. Adjusting Entries on Monthly Basis:

S.No. Date Particulars Debit Credit
a. Jan 31, 2019 Depreciation Expense (84,000/5)*1/12 1,400
Accumulated Depreciation - Equipment 1,400
(To record Depreciation for the month of Jan)
Feb 28, 2019 Depreciation Expense (84,000/5)*1/12 1,400
Accumulated Depreciation - Equipment 1,400
(To record Depreciation for the month of Feb)
Mar 31, 2019 Depreciation Expense (84,000/5)*1/12 1,400
Accumulated Depreciation - Equipment 1,400
(To record Depreciation for the month of March)
Apr 30,2019 Depreciation Expense (84,000/5)*1/12 1,400
Accumulated Depreciation - Equipment 1,400
(To record Depreciation for the month of April)
May 31, 2019 Depreciation Expense (84,000/5)*1/12 1,400
Accumulated Depreciation - Equipment 1,400
(To record Depreciation for the month of May)
June 30, 2019 Depreciation Expense (84,000/5)*1/12 1,400
Accumulated Depreciation - Equipment 1,400
(To record Depreciation for the month of June)
July 31, 2019 Depreciation Expense (84,000/5)*1/12 1,400
Accumulated Depreciation - Equipment 1,400
(To record Depreciation for the month of July)
Aug 31, 2019 Depreciation Expense (84,000/5)*1/12 1,400
Accumulated Depreciation - Equipment 1,400
(To record Depreciation for the month of Aug)
Sept 30, 2019 Depreciation Expense (84,000/5)*1/12 1,400
Accumulated Depreciation - Equipment 1,400
(To record Depreciation for the month of Sept)
Oct 31, 2019 Depreciation Expense (84,000/5)*1/12 1,400
Accumulated Depreciation - Equipment 1,400
(To record Depreciation for the month of Oct)
Nov 30, 2019 Depreciation Expense (84,000/5)*1/12 1,400
Accumulated Depreciation - Equipment 1,400
(To record Depreciation for the month of Nov)
Dec 31, 2019 Depreciation Expense (84,000/5)*1/12 1,400
Accumulated Depreciation - Equipment 1,400
(To record Depreciation for the month of Dec)
b. July 31, 2019 Interest Expense (24,000*10%)*1/12 200
Interest Payable 200
(To record Interest Expenses for the month of July)
Aug 31, 2019 Interest Expense (24,000*10%)*1/12 200
Interest Payable 200
(To record Interest Expenses for the month of Aug)
Sept 30, 2019 Interest Expense (24,000*10%)*1/12 200
Interest Payable 200
(To record Interest Expenses for the month of Sept)
Oct 31, 2019 Interest Expense (24,000*10%)*1/12 200
Interest Payable 200
(To record Interest Expenses for the month of Oct)
Nov 30, 2019 Interest Expense (24,000*10%)*1/12 200
Interest Payable 200
(To record Interest Expenses for the month of Nov)
Dec 31, 2019 Interest Expense (24,000*10%)*1/12 200
Interest Payable 200
(To record Interest Expenses for the month of Dec)
c. Oct 31, 2019 Insurance Expense (3,600/8) 450
Prepaid Insurance 450
(To record Insurance Expense for the month of Oct)
Nov 30, 2019 Insurance Expense (3,600/8) 450
Prepaid Insurance 450
(To record Insurance Expense for the month of Nov)
Dec 31, 2019 Insurance Expense (3,600/8) 450
Prepaid Insurance 450
(To record Insurance Expense for the month of Dec)
d. Dec 31, 2019 Salary Expense 5,000
Salaries Payable 5,000
(To record salary expense due but not paid)
e. Dec 31, 2019 Accounts Receivable 3,000
Service Revenue 3,000
(To record services performed on account)
f. Dec 31, 2019 Unearned Service Revenue 7,000
Service Revenue 7,000
(To record service revenue performed for advance received)
g. Dec 31, 2019 Supplies Expense (2,000-950) 1,050
Supplies 1,050
(To record supplies expenses incurred)

Note: Assumed Equipment is purchased in the beginning of the year and hence depreciation is provided in all months.

II. Adjusting Entries on yearly basis:

S.No. Date Particulars Debit Credit
a. Dec 31, 2019 Depreciation Expense (84,000/5) 16,800
Accumulated Depreciation - Equipment 16,800
(To record Depreciation expense for the year)
b. Dec 31, 2019 Interest Expense (24,000*10%)*6/12 1,200
Interest Payable 1,200
(To record Interest Expenses for the period of July to Dec)
c. Dec 31, 2019 Insurance Expense (3,600 * 3/8) 1,350
Prepaid Insurance 1,350
(To record Insurance Expense for the period of Oct to Dec)

ekkarill92 answered 1 year ago
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