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.