Intermediate Accounting Assignment - AIS, Cash, Accounts Receivable
Problem 1 - The balance in the prepaid insurance account at December 31, 20x4 of $166,000 consists of three insurance policies:
Policy Effective Date Expiry Date Amount
A Jan 1, 20x4 June 30, 20x5 $114,000
B March 31, 20x4 March 31, 20x5 72,000
C August 31, 20x4 August 31, 20x6 132,000
During the current year, 20x5, the following new policies were purchased.
Policy Effective Date Expiry Date Amount
A (renewal) June 30, 20x5 December 31, 20x6 $124,200
B (renewal) March 31, 20x5 March 31, 20x6 74,400
D May 31, 20x5 December 31, 20x6 79,800
Required - Write one adjusting journal entry to adjust the prepaid insurance/insurance expense accounts at December 31, 20x5.
Problem 2 - A company's cash account was last reconciled on November 30, 20x5. The unadjusted cash balance at December 31, 20x5 was $215,322. A comparison of the bank statement to the cash account revealed the following (note that none of the items below have been recorded on the books):
- Interest on the bank loan of $4,600 was charged on the bank statement.
- Bank service charges for the month were $670
- Outstanding cheques at December 31, 20x5 were $46,520
- The December 30, 20x5 and December 31, 20x5 deposits of $45,990 and $32,405 were recorded by the bank on January 2, 20x6
- One of the cheques that cleared was recorded for $7,430. The cheque was recorded on the bank statement at $7,043 which was the correct amount. The cheque was for selling expenses.
- The bank statement balance at December 31, 20x5 was $178,564.
Required - Prepare the adjusting journal entries and a bank reconciliation as at December 31, 20x5.
Problem 3 - The unadjusted trial balance as at December 31, 20x5 shows a credit balance in the doubtful accounts of $35,500. This balance is the December 31, 20x4 balance. During 20x5, several accounts were written off to bad debt expense. A review of the accounts receivable at year-end revealed that an additional $45,000 of accounts should be written off - these accounts are all in the 90 days and over category. The following is an aged listing of accounts at year-end:
Age Balance % uncollectible
0-30 $370,000 2%
31-60 225,000 5%
61-90 150,000 10%
90+ 135,000 100% on $45,000 of the accounts and 40% on the balance
$880,000
Required - Prepare the adjusting journal entries to adjust the doubtful accounts balance at December 31, 20x5.