Account Balances Taken from the Ledger of Owens Company on December

question 87

Essay

Account balances taken from the ledger of Owens Company on December 31,2013,are as follows:

Adjustments on December 31,2013,are required as follows:
(a)Estimated bad debt loss rate is 1/4 percent of credit sales.Credit sales for the year amounted to $200,000.Classify bad debt expense as a selling expense.
(b)Interest on the long-term note receivable was last collected August 31,2013.
(c)Estimated life of the equipment is 10 years,with a residual value of $20,000.Allocate 10 percent of depreciation expense to general and administrative expense and the remainder to selling expenses.Use straight-line depreciation.
(d)Estimated economic life of the patent is 14 years (from January 1,2013)with no residual value.Straight-line amortization is used.Depreciation expense is classified as selling expense.
(e)Interest on the mortgage payable was last paid on November 30,2013.
(f)On June 1,2013,the company rented some office space to a tenant for one year and collected $3,000 rent in advance for the year; the entire amount was credited to rent revenue on this date.
(g)On December 31,2013,the company received a statement for calendar year 2013 property taxes amounting to $1,300.The payment is due February 15,2014.Assume that the payment will be made on February 15,2014,and classify expense as selling expense.
(h)Sales supplies on hand at December 31,2013,amounted to $300; classify as selling expense.
(i)Assume an average income tax rate of 40 percent corporate tax rate on all items including the extraordinary gain..
(1)Prepare an eight-column work sheet.
(2)Prepare adjusting and closing entries.

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