Presented below is the December 31, 2015 trial balance of Balderdash Inc., a boutique in Albany, New York.
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Balderdash Inc.
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Trial Balance
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December 31, 2015
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Cash
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Debit
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Credit
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Accounts Receivable
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$18,500
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Allowance for doubtful accounts
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32,000
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Inventory, Dec. 31
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$700
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Prepaid Insurance
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80,000
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Equipment
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5,100
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Accumulated depreciation-equipment
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84,000
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Notes Payable
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35,000
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Common Stock
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28,000
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Retained earnings
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80,600
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Sales Revenue
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10,000
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Cost of goods sold
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408,000
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Salaries and wages expense
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65,000
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Advertising expense
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6,700
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Sales commissions expense
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50,000
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Supplies expense
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5,000
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$754,300
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$754,300
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Instructions:
1. Prepare annual adjusting entries for the following (you made need to create additional accounts):
a. Equipment is depreciated using an 8-year useful life with a $5,000 salvage value using the straight-linemethod.
b. Supplies on hand at the end of the period total $1,500. Purchases of supplies are debited to SuppliesExpense.
c. Sales revenue includes a $8,500 deposit paid by a customer who special ordered merchandise. Themerchandise has not yet been shipped from the supplier and has been correctly excluded from cost of goodssold and ending inventory.
d. The notes payable accrue interest at 4.25% per year payable annually on April 1.
e. Salaries and wages earned but not yet paid to employees total $1,400.
f. Unpaid commissions earned by employees total $2,500.
g. The balance in the prepaid insurance account represents the cost of a one-year policy purchased onNovember 30.
h. Bad debt expense is estimated to be $1,250 for the year.
2. Prepare the reversing entries that should be recorded on January 1, 2016