Financial Accounting: Comprehensive Problem 11 (CP11) Bug-Off Exterminators provides pest control

Financial Accounting
Comprehensive Problem 11 (CP11)
Bug-Off Exterminators provides pest control services and sells extermination products manufactured by other companies. The following six-column table...

BUG-OFF EXTERMINATORS

December 31, 2011

Unadjusted Trial Balance

Cash 18,000

Accounts receivable 5,000

Allowance for doubtful accounts 928

Merchandise inventory 12,700

Trucks 40,000

Accum. depreciation-Trucks -

Equipment 55,000

Accum. depreciation-Equipment 14,400

Accounts payable 4,800

Estimated warranty liability 1,400

Unearned services revenue -

Interest payable -

Long-term notes payable 15,000

D. Buggs, Capital 62,600

D. Buggs, Withdrawals 10,000

Extermination services revenue 70,000

Interest revenue 872

Sales (of merchandise) 80,000

Cost of goods sold 57,991

Depreciation expense-Trucks -

Depreciation expense-Equipment -

Wages expense 32,500

Interest expense -

Rent expense 10,000

Bad debts expense -

Miscellaneous expense 1,338

Repairs expense 671

Utilities expense 6,800

Warranty expense -

Totals 250,000 250,000

The following information in a through h applies to the company at the end of the current year.

a. The bank reconciliation as of December 31, 2011, includes the following facts.

Cash balance per bank 16,100

Cash balance per books 18,000

Outstanding checks 1,800

Deposit in transit 1,450

Interest earned (on bank account) 52

Bank service charges (miscellaneous expense) 15

Reported on the bank statement is a canceled check that the company failed to record.

b. An examination of customers' accounts shows that accounts totaling $779 should be written off as uncollectible. Using an aging of receivables....

c. A truck is purchased and placed in service on January 1, 2011. Its cost is being depreciated....

Original cost 40,000

Expected salvage value 5,000

Useful life (years) 5

d. Two items of equipment (a sprayer and an injector) were purchased and put into service in early January 2009.

e. On August 1, 2011, the company is paid $7,680 cash in advance to provide monthly service for an apartment complex for one year.

f. The company offers a warranty for the services it sells. The expected cost of providing warranty service is 2.5% of the extermination...

g. The $15,000 long-term note is an 8%, 5-year, interest-bearing note with interest payable annually on December 31...

h. The ending inventory of merchandise is counted and determined to have a cost of $12,700.

Required:
1. Use the preceding information to determine amounts for the following items.
a. Correct (reconciled) ending balance of Cash, and the amount of the omitted check.
b. Adjustment needed to obtain the correct ending balance of the Allowance for Doubtful Accounts.
c. Depreciation expense for the truck used during year 2011.
d. Depreciation expense for the two items of equipment used during year 2011.
e. The adjusted 2011 ending balances of the Extermination Services Revenue and Unearned Services Revenue accounts.
f. The adjusted 2011 ending balances of the accounts for Warranty Expense and Estimated Warranty Liability.
g. The adjusted 2011 ending balances of the accounts for Interest Expense and Interest Payable.
2. Use the results of part 1 to complete the six-column table
3. Prepare journal entries to record the adjustments entered on the six-column table.
4.1 Prepare a single-step income statement for year 2011.
4.2 Prepare a Statement of owner's equity for year 2011.
4.3 Prepare a Classified balance sheet as at 2011.
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