Question

Journalize the following entries :

1. It was determined that a shipment on Dec 30 from Brodie to Dawson Corp was not recorded. Dawson purchased from Brodie 100,000 lbs of biscuits for sales price of $4.00 per LB. Cost of this product was $1.50 per LB. Terms were FOB Shipping Point. Payment terms Net 30. The Company also billed the required 7% sales tax which was added to the receivable from Dawson.

2. Per review of Brodie's AR Aging by the finance team using the Aging of Receivables Method, it was determined that 10% of the ending Accounts Receivable Balance of $4,500,000 need to be reserved for in the Allowance for Doubtful Accounts (i.e. the ending balance). Record the adjustment keeping in mind the Allowance for Doubtful Accounts has a $120,000 balance before this adjustment

3.  Brodie needs to record Warranty Expense for 2018. It offers an up to 2 year freshness and taste warranty, and expects that 3% of the ending net Revenue of $16,000,000 for 2018 will ultimately have warranty claims to be resolved for customers

4. On Jul 1, Brodie issued $4,000,000 of 6% Bonds Payable at 95, with semi-annual interest due next on Jan 1. Bonds have two year maturity and mature on Jul 1, 2020. Accrue the Interest Expense and related liability as of Dec 31, 2018 for the interest due on Jan 1, 2019

5. The Bond Issuance on Jul 1, 2018, had a discount that needs to be amortized over its two year term as additional interest expense. Use the straight-line method to amortize the Bond Discount (thus increasing the Bonds Payable carrying value)

6.The Company needs to accrue its final Payroll of the year Dec 16-31, 2018, which will be paid on Jan 5, 2019. Total Salary and Wage accrual for the period is $200,000, and the payroll tax accrual for Company payroll tax expense is an extra 9% of the $200,000. Record in the separate accounts

7.Based upon the banner year's financial results for 2018, Management asked the Board of Directors for a bonus pool to pay its management & employees of $350,000. After discussion, the Board approved an even bigger bonus pool of $400,000, allowing management discretion in the allocation among the differing employees. Record this accrual

8.A physical inventory of the equipment performed on the last day of the year uncovered that a 10 year old piece of equipment was disposed of earlier in the year and dropped off at the dump. The Equipment has a cost of $60,000, and it was fully depreciated. Remove this asset and its related Accumulated Depreciation from the books

Answer 1

1.

Dawson Corp A/c(100,000lbs*$4.00lb + tax 7%)                      Dr. $428,000

            To Merchant Inventory (100,000lbs *$1.5lb)                                           Cr.$150,000

            To Sales Revenue            (100,000lbs * $2.5lb)                                     Cr. $250,000

            To Tax Payable ($400,000*7%)                                                              Cr. $28,000

Being the shipment made on Dec 30^th not recorded. Entry posted to recognize the revenue on shipment

2 on 31st Dec 2019

Bad Debts A/c Dr.                            $330,000

            To Allowance for Doubtful Debts A/c                  $330,000

(Being 10% provision created on the total AR balance based on the opening reserve $120,000)

3. on 31st Dec 2019

Warranty Expenses A/C                             Dr. $240,000

            Warranty Payable A/C                                            Cr. $240,000

(Being 2years warranty expected at 3% on the total revenue for 2018)

Answers for 4 & 5

On 31st Dec 2018

Interest Expenses                            Dr.170,000

                To Interest payable                                                         $120,000

                To Discount on Bond Payable/Bond Payable                 $ 50,000

Being the interest accrued for 6 months starting from Jul 2018 to Dec 2018 and Bond Payable amortized over 2 years starting from July 2018

on 31st Dec 2019

Interest Expenses                            Dr.220,000

                To Interest payable                                                         $120,000

                To Discount on Bond Payable/Bond Payable                 $100,000

(Being the interest accrued semi-annual period starting from Jan 2019 to Dec 2019 and the discount on bond payable amortized over 2years - amortized for 12 months in 2019.

6. On 31st Dec 2018

Salary & Wages A/c                                    Dr. 218,000

                        To Salary & Wage Payable                                     Cr.$200,000

                        To Payroll Tax Payable                                           Cr.    $18,000

Being the salary accrual made for the payment made on Jan 5^th 2019 and 9% provision created for the payroll tax withheld

7. for the year ending 31st Dec 2018

Employee Bonus A/c                                       Dr. 350,000

                Bonus Payable A/c                                                           Cr$350,000

Being the accrual made for the amount payable to employees as bonus for the year 2018

After Board’s approval additional provision for the year ending 31^st Dec 2018

Employee Bonus A/c                                       Dr. $50,000

                Bonus Payable A/c                                                           Cr. 50,000

8.

Accumulated Depreciation A/C Dr.                            $60,0000

                                Equipment/Asset Account                                                                           Cr.$60,000

Being the asset disposed and cleared from the books