Question

In: Accounting

A -Based on your review of the cash balances, you note that there was an overdraft...

A -Based on your review of the cash balances, you note that there was an overdraft of $12,000 in one of your bank accounts. However, there are many bank accounts at the specific bank where the account with the overdraft is deposited. The total cash at this bank equaled a debit balance of $180,000. The previous accountant moved the overdraft to Accounts Payable. You also note the Board of Directors has restricted $65,000 of cash for future expansion. This $65,000 is part of the cash balance. The future expansion will not occur for several more years.

B- Based on your inquiries, you note that $35,000 of accounts receivable had been written off during the year. The clerk had debited bad debt expense for $35,000 and credited Accounts Receivable for $35,000. When $8,500 of accounts previously written off had been collected, the accountant debited cash and credited sales. The company uses the allowance method based on the aging of accounts receivable. Based on this method, Accounting Creations determines that uncollectible accounts are $46,500 at the end of 2018.

C - On April 1, 2018, Accounting Creations renewed a 15-month insurance policy for $15,000. All cash was paid at the time the policy was signed and insurance expense was increased. All other transactions involving insurance were properly recorded.

Accounting Creations Incorporated
End of Period Worksheet
For the Year Ended December 31, 2018
Unadjusted Adjusted
Account Title Trial Balance Adjustments Trial Balance
DR CR DR CR DR CR
Cash       330,000                 -  
Accounts Receivable       694,980                 -  
Allowance for Doubtful Accounts               -            17,000
Interest Receivable               -                   -  
Merchandise Inventory       425,000                 -  
Prepaid Insurance               -                   -  
LIFO Reserve               -            32,000
Prepaid Advertising               -                   -  
Prepaid Rent        17,000                 -  
Office Supplies          6,000                 -  
Note Receivable        25,000
Available for Sale Securities       375,000                 -  
Office Building    3,750,000                 -  
Accumulated Depreciation - Office Building               -            87,500
Storage Building    1,275,000                 -  
Accumulated Depreciation - Storage Building               -                   -  
Land       750,000                 -  
Leasehold Improvements       225,000                 -  
Accumulated Depreciation - Leasehold Improvements               -                   -  
Office Equipment       325,000                 -  
Accumulated Depreciation - Office Equipment               -            65,000
Patent       150,000                 -  
Accounts Payable               -          345,000
Sales Tax Payable               -                   -  
Salaries Payable               -          142,000
Payroll Taxes Payable               -            25,000
Interest Payable               -                   -  
Income Tax Payable               -                   -  
Unearned Rent Revenue               -                   -  
Loan Payable - Onstar Bank               -          650,000
Loan Payable - Coldstar Bank               -        2,000,000
Common Stock               -          650,000
Additional Paid in Capital               -        1,998,750
Retained Earnings               -          920,000
Accumulated Other Comprehensive Income               -            25,000
Dividends        84,750                 -  
Sales               -        4,528,200
Sales Returns and Allowances        42,250                 -  
Sales Discounts        19,250                 -  
Cost of Goods Sold    1,979,500                 -  
Sales Salaries Expense       436,400                 -  
Office Salaries Expense       274,000                 -  
Advertising Expense        16,000                 -  
Depreciation Expense - Office Building               -  
Depreciation Expense - Leasehold Improvements               -                   -  
Depreciation Expense - Office Equipment               -                   -  
Leasing Expense - Stores       132,000                 -  
Miscellaneous Selling Expense        23,000                 -  
Research & Development Expense        15,000
Rent Expense - Storage Facility               -                   -  
Insurance Expense        15,000                 -  
Office Supplies Expense        35,000                 -  
Miscellaneous Administrative Expense          9,170                 -  
Rent Revenue               -            75,000
Interest Revenue on Note Receivable               -                   -  
Dividend Revenue on AFS Securities               -            25,000
Interest Expense               -                   -  
Bad Debt Expense        35,000                 -  
Amortization Expense               -                   -  
Income Tax Expense               -                   -  
Payroll Taxes Expense       121,150                 -  
11,585,450    11,585,450

Accounting Creations was authorized to issue 3,000,000 shares of $1 par Common Stock but has only issued 650,000 shares of common stock as of 12/31/2018. No new shares were issued during 2018.

1.         On the “Adjusting Journal Entries” worksheet, prepare in journal entry form all adjusting    and correcting journal entries based on the following information. All information was        provided to you as of 12/31/2018. (Round all numbers to the nearest dollar). Label            journal entries a through t.

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