The unadjusted trial balance of Marin Inc at December 31 201

The unadjusted trial balance of Marin Inc. at December 31, 2017, is as follows:

Debit

Credit

Cash

$17,340

Accounts Receivable

106,100

Allowance for Doubtful Accounts

$3,670

Inventory

61,700

Prepaid Insurance

4,599

Bond Investment at Amortized Cost

50,400

Land

28,100

Buildings

152,700

Accumulated Depreciation—Buildings

6,045

Equipment

34,800

Accumulated Depreciation—Equipment

5,800

Goodwill

16,750

Accounts Payable

101,100

Bonds Payable (20-year, 7%)

168,000

Common Shares

120,500

Retained Earnings

61,184

Sales Revenue

190,500

Rent Revenue

11,100

Advertising Expense

23,100

Supplies Expense

10,600

Purchases

97,900

Purchase Discounts

840

Salaries and wages expense

51,800

Interest Expense

12,850

$668,739

$668,739

Additional information:

1.                     Actual advertising costs amounted to $1,540 per month. The company has already paid for advertisements in Montezuma Magazine for the first quarter of 2018.

2.                     The building was purchased and occupied on January 1, 2015, with an estimated useful life of 20 years, and residual value of $31,800. (The company uses straight-line depreciation.)

3.                     Prepaid insurance contains the premium costs of several policies, including Policy A, cost of $2,667, one-year term, taken out on April 1, 2017; and Policy B, cost of $1,932, three-year term, taken out on September 1, 2017.

4.                     A portion of Marin’s building has been converted into a snack bar that has been rented to the Bramble Corp. since July 1, 2016, at a rate of $7,400 per year payable each July 1.

5.                     One of the company’s customers declared bankruptcy on December 30, 2017. It is now certain that the $2,700 the customer owes will never be collected. This fact has not been recorded. In addition, Marin estimates that 3% of the Accounts Receivable balance on December 31, 2017, will become uncollectible.

6.                     An advance of $510 to a salesperson on December 31, 2017, was charged to Salaries and Wages Expense.

7.                     On November 1, 2015, Marin issued 168 $1,000 bonds at par value. Interest is paid semi-annually on April 30 and October 31.

8.                     The equipment was purchased on January 1, 2015, with an estimated useful life of 10 years, and no residual value. (The company uses straight-line depreciation.)

9.                     On August 1, 2017, Marin purchased at par value 42 $1,200, 7% bonds maturing on July 31, 2019. Interest is paid on July 31 and January 31.

10.                   The inventory on hand at December 31, 2017, was $91,100 after a physical inventory count. (Use \"Inventory\" account for closing out the beginning inventory amount and recording the ending inventory amount.)

(a)

Prepare adjusting and correcting entries for December 31, 2017, using the information given. Record the adjusting entry for inventory using a Cost of Goods Sold account. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select \"No Entry\" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,250.)

		Debit		Credit
Cash		$17,340
Accounts Receivable		106,100
Allowance for Doubtful Accounts				$3,670
Inventory		61,700
Prepaid Insurance		4,599
Bond Investment at Amortized Cost		50,400
Land		28,100
Buildings		152,700
Accumulated Depreciation—Buildings				6,045
Equipment		34,800
Accumulated Depreciation—Equipment				5,800
Goodwill		16,750
Accounts Payable				101,100
Bonds Payable (20-year, 7%)				168,000
Common Shares				120,500
Retained Earnings				61,184
Sales Revenue				190,500
Rent Revenue				11,100
Advertising Expense		23,100
Supplies Expense		10,600
Purchases		97,900
Purchase Discounts				840
Salaries and wages expense		51,800
Interest Expense		12,850
		$668,739		$668,739

Solution

Hi,

	Account Titles & Explanations	Debit	Credit
1	Prepaid Expenses	4,620
	($23,100 - ($1,540 * 12))
	Advertising Expense		4,620
	Being advertising expenses for first quarter of 2018 transferred to prepared expenses
2	Depreciation	6,045
	($152,700 - $31,800)/20     (For 2017)
	Retained Earnings	6,045
	($152,700 - $31,800)/20     (For 2016)
	Accumulated Depreciation - Buildings		12,090
	Being depreciation charged for 2016 & 2017
3	Insurance Expenses	2,384
	($2,667/12*3 for 3 months of 2018 & $1,932/36*32 for 32 months remaining)
	Prepaid Insurance		2,384
	Being insurance expenses for 2017 charged to current year expenses
4	Rental Revenue	3,700
	($11,100 / 1.5 * 0.5)
	Retained Earnings		3,700
	Being rental income for half year of 2016 transferred to retained earnings
5	Provision for Doubtful Accounts	3,102
	($106,100 - $2,700)*3%
	Accounts Receivable		2,700
	($2,700 written off for bankcrupt customer)
	Allowance for Doubtful Accounts		402
	($3,102 provision at year ending 2017 - $2,700 written off for bankcrupt customer)
	Being uncollectible amount written off and provision created for estimated uncollectibles)
6	Advance to Salesperson	510
	Salaries & Wages		510
	Being advance to salesperson wrongly charged to salaries now corrected
7	Interest Expenses	1,960
	($168,000*7%/12*2)
	Accrued Interest on Bonds Payable		1,960
	Being interest accrued on bonds
8	Depreciation	3,480
	$34,800/20     (For 2017)
	Retained Earnings	1,160
	($3,480 * 2) - $6,960 (For earlier period)
	Accumulated Depreciation - Buildings		4,640
	Being depreciation charged till december, 2017
9	Accrued Interest on Bond Investment	1,470
	($50,400 * 7% / 12 *5)
	Interest Income		1,470
	Being interest accrued on bond investment
10	Inventory	29,400
	(Ending inventory - Opening Inventory)
	Cost of goods sold		29,400
	Being cost of unsold inventory reversed