Question

The following trial balance was taken from the books of Fisk Corporation on December 31, 2014.

		Account	Debit	Credit
Cash			$ 9,000
Accounts Receivable			40,000
Notes Receivable			10,000
Allowance for Doubtful Accounts				$   1,800
Inventory			44,000
Prepaid Insurance			4,800
Equipment			110,000
Accumulated Depreciation--Equip.				15,000
Accounts Payable				10,800
Common Stock				44,000
Retained Earnings				75,000
Sales Revenue				260,000
Cost of Goods Sold			126,000
Salaries and wages Expense			50,000
Rent Expense			12,800	________
	Totals		$406,600	$406,600

At year end, the following items have not yet been recorded.

a.	Insurance expired during the year, $3,000.
b.	Estimated bad debts, 1.5% of gross sales.
c.	Depreciation on equipment, 12% per year on original cost.
d.	Interest at 6% is receivable on the note for one full year.
*e.	Rent paid in advance at December 31, $6,500 (originally charged to expense).
f.	Accrued salaries and wages at December 31, $7,800.

Instructions

(a)	Prepare the necessary adjusting entries.
(b)	Prepare the necessary closing entries.

Answer 1

a)
Fisk Corporation
Adjusting Journal Entries
S.No.	General,Journal	Debit	Credit
a)	Insurance Expenses	$       3,000.00
	To Prepaid Insurance		$       3,000.00
	(Being amount of Insurance Expense)
b)	Bad debt expense($260000*1.5%)	$       3,900.00
	To Allowance for doubtful accounts		$       3,900.00
	(Being amount of bad debt expense)
c)	Depreciation ($110000*12%)	$     13,200.00
	To Accumulated Depreciation		$     13,200.00
	(Being amount of Depreciation Expense)
d)	Interest Receivable($10000*6%)	$           600.00
	To Interest Revenue		$           600.00
	(Being amount of Interest Receivable)
e)	Prepaid Rent	$       6,500.00
	To Rent Expense		$       6,500.00
	(Being amount of Prepaid Rent)
f)	Salaries Expense	$       7,800.00
	To Salaries Payable		$       7,800.00
	(Being amount of Salaries payable)
b)
Fisk Corporation
Closing Entries
S.No.	General,Journal	Debit	Credit
1)	Sales Revenue	$ 2,60,000.00
	Interest Revenue	$           600.00
	To Income Summary		$ 2,60,600.00
	(Being amount of Sales revenue and interest transferred to Income summary)
2)	Income Summary	$ 2,10,200.00
	To Salaries Expense($50000+$7800)		$     57,800.00
	To Bad debt Expense		$       3,900.00
	To Rent Expense($12800-$6500)		$       6,300.00
	To Depreciation Expense		$     13,200.00
	To Insurance Expense		$       3,000.00
	To Cost of goods sold		$ 1,26,000.00
	(Being amount of Expenses transferred to Income summary)
3)	Income Summary($260600-$210200)	$     50,400.00
	To Retained Earnings		$     50,400.00
	(Net income transferred to retained earnings)