1) Accrued warranty costs should be recorded in an amount equal to 1% of gross sales. Gross sales are 737,500.
2) Estimated bad debts should be equal to 5% of Accounts receivable. Accounts Receivables are 120,000.
3) The market value of inventory calculated under lower of cost or market is $55,000. In the trial balance it states 60,000.
4) Interest should be accrued on the Notes Payable:
The 1 year note payable has an interest rate of 8% & was issued on December 6, 2011. The 1 year note payable on the trial balance is 60,000.
5) Depreciation needs to be recorded for 2011, none of the assets has an estimated residual value & the company uses straight-line:
Equipment - $180,000 purchased 7/1/10 has a 5 year life
Equipment - $20,000 purchased 1/1/11 has a 5 year life
Equipment - $60,000 purchased 12/6/11 has a 5 year life
Furniture - $45,000 purchased 12/1/10 has a 10 year life
Truck - $60,000 purchased 7/1/10 has a 5 year life