Question

Below is the unadjusted trial balance for Franklin Services Limited (FSL) as at its December 31, 2017 fiscal year end

Franklin Services Limited (FSL) Unadjusted Trial Balance December 31, 2017
	Debit		Credit
Cash	$35,980
Accounts Receivable	117,000
Allowance for Doubtful Accounts	4,000
FV-OCI Investments	329,600
Equipment	109,000
Accumulated Depreciation – Equipment			$10,900
Unearned Revenue			4,900
Note Payable			79,000
Common Shares			158,500
Retained Earnings			86,200
Service Revenue			1,707,968
Salaries and Wages Expense	1,416,000
Insurance Expense	11,568
Interest Expense	6,320
Supplies Expense	18,000
Total	$2,029,468		$2,029,468

Additional information regarding fiscal year end adjusting entries which have not yet been posted is as follows

(a)		The company paid $11,568 for a 24 month insurance policy effective April 1, 2017.
(b)		FSL estimates that $21,000 of its accounts receivable as at year end will be uncollectible.
(c)		Interest on the note payable is charged at 12% per year. The note was issued on March 1, 2017 and the last interest payment was on October 31, 2017.
(d)		FSL is depreciating its equipment using the straight-line method. It is estimated that the useful life of the equipment is 5 years. The equipment was purchased on July 1, 2016. Depreciation expense has yet to be recorded for 2017.
(e)		On December 31, FSL paid the local newspaper for advertising for the first three months of 2018. The newspaper charges $320 per month. This transaction has not yet been recorded.
(f)		Acquired $18,000 of supplies for cash. $2,000 remained on hand at the end of the year.
(g)		FV-OCI investments cost $280,000 and have a fair value of $350,000 at year end.

Required:

Prepare all adjusting journal entries related to the information above.

Answer 1

Date	Account Titles and Explanation	Debit	Credit
Dec 31	Insurance Expense	4,338
	Prepaid Insurance		4,338
	(11,568 x 9/24)
Dec 31	Bad Debts Expense	21,000
	Allowance for Doubtful Accounts		21,000
Dec 31	Interest Expense	1,580
	Interest Payable		1,580
	(79,000 x 12% x 2/12)
Dec 31	Depreciation Expense	21,800
	Accumulated Depreciation – Equipment		21,800
	(109,000/5)
Dec 31	Prepaid Advertising	960
	Cash		960
Dec 31	Supplies	2,000
	Supplies Expense		2,000
Dec 31	FV-OCI Investments	20,400
	Unrealized Holding Gain (OCI)		20,400
	(350,000 - 329,600)