Question

Journalize entries related to bank reconciliation and all adjusting entries

Whispering Winds Corp. prepares quarterly financial statements. The post-closing trial balance at December 31, 2021, is presented below.

WHISPERING WINDS CORP. Post-Closing Trial Balance December 31, 2021
		Debit		Credit
Cash		$23,400
Accounts Receivable		22,600
Allowance for Doubtful Accounts				$1,500
Equipment		24,000
Accumulated Depreciation—Equipment				10,000
Buildings		109,000
Accumulated Depreciation—Buildings				10,000
Land		20,000
Accounts Payable				12,100
Common Stock				82,000
Retained Earnings				83,400
		$199,000		$199,000

During the first quarter of 2022, the following transactions occurred:

1.		On February 1, Sheffield collected fees of $10,800 in advance. The company will perform $900 of services each month from February 1, 2022, to January 31, 2018.
2.		On February 1, Sheffield purchased computer equipment for $7,875 plus sales taxes of $525. $2,625 cash was paid with the rest on account. Check #455 was used.
3.		On March 1, Sheffield acquired a patent with a 10-year life for $8,400 cash. Check #456 was used.
4.		On March 28, Sheffield recorded the quarter’s sales in a single entry. During this period, Sheffield had total sales of $140,000 (not including the sales referred to in item 1 above). All of the sales were on account.
5.		On March 29, Sheffield collected $133,000 from customers on account.
6.		On March 29, Sheffield paid $16,100 on accounts payable. Check #457 was used.
7.		On March 29, Sheffield paid other operating expenses of $95,500. Check #458 was used.
8.		On March 31, Sheffield wrote off a receivable of $200 for a customer who declared bankruptcy.
9.		On March 31, Sheffield sold for $1,810 equipment that originally cost $12,000. It had an estimated life of 5 years and salvage of $1,000. Accumulated depreciation as of December 31, 2021, was $8,800 using the straight line method. (Hint: Record depreciation on the equipment sold, then record the sale.)

Bank reconciliation data and adjustment data:

1.		The company reconciles its bank statement every quarter. Information from the December 31, 2021, bank reconciliation is: Deposit in transit: 12/30/2021 $4,500 Outstanding checks #440 3,300 #452 500 #453 900 #454 5,850 The bank statement received for the quarter ended March 31, 2022, is as follows: Beginning balance per bank $29,450 Deposits: 1/2/2022, $4,500; 2/2/2022, $10,800; 3/30/2022, $133,000 148,300 Checks: #452, $500; #453, $900; #457, $16,100; #458, $95,500 (113,000) Debit memo: Bank service charge (record as operating expense) (100) Ending bank balance $64,650
2.		Record revenue earned from item 1 above.
3.		$25,600 of accounts receivable at March 31, 2022, are not past due yet. The bad debt percentage for these is 4%. The balance of accounts receivable are past due. The bad debt percentage for these is 22.00%. Record bad debt expense. (Hint: You will need to compute the balance in accounts receivable before calculating this.)
4.		Depreciation is recorded on the equipment still owned at March 31, 2022. The new equipment purchased in February is being depreciated on a straight-line basis over 5 years and salvage value was estimated at $900. The old equipment still owned is being depreciated over a 10-year life using straight-line with no salvage value.
5.		Depreciation is recorded on the building on a straight-line basis based on a 30-year life and a salvage value of $16,000.
6.		Amortization is recorded on the patent.
7.		The income tax rate is 30%. This amount will be paid when the tax return is due in april.

Answer 1

Accounts Receivable Balance = $22600+140000-133000-200

Account Titles	Debit	Credit
Bank Service Charges	$         100.00
Cash		$          100.00
(Entry for Bank reconciliation)
Unearned Service Revenue	$      1,800.00		=900*2
Service Revenue		$       1,800.00
(Revenue earned for 2 months)
Bad Debt Expense	$         560.00		=25600*4%+(29400-25600)*22%-1300
Allowance for Doubtful accounts		$          560.00
(Bad debt expense recorded)
Depreciation Expense - Equipment	$         450.00		=((24000-12000)/10+(7875+525-900)/5)*2/12
Acc. Depreciation - Equipment		$          450.00
(Depreciation expense on equipment)
Depreciation Expense - Building	$         775.00		=(109000-16000)/30*3/12
Acc. Depreciation - Building		$          775.00
(Depreciation expense on building)
Amortization Expense	$           70.00		=8400/10*1/12
Patent		$            70.00
(Patent amortization)
Income Tax Expense	$    12,886.50		=(140000+1800-95500-(12000-8800-1810)-100-560-450-775-70)*30%
Income Tax Payable		$     12,886.50
(Income tax expense)