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The objective of this problem 3-9 is to understand the concept of using the T-Account , the journalizing ,and the closing.

Problem 3-9

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Part A & B

Part A

Part B Nancy Drew Boutique

Cash | Debit 18,000 Account Receivable | Debit 42,000 Allowance for Doubtful Accounts | Credit + 700 Inventory | Debit 80,000 Prepaid Insurance | Credit + 5,100 Furniture & Equipment | Debit 84,000 Accumulated Depreciation of Furniture & Equipment | Credit + 35,000 Notes Payable | Credit + 28,000

Prepared Balance Sheet December 31, 2011

Bad Debt Expense Depreciation Expense Furniture & Equip.

1,400

14,000 2,550 3,360 2,400

Insurance Expense (Prepaid) Interest Expense (Payable)

Sales Salaries Expense (Payable) Prepaid Advertising (Cash) 700

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Bad debts are estimated to be $1,400 Entry

Adjusting

Bad Debts Expense..1400 Allowance for Doubtful Accounts1400 Doubt. Acct. 700 1400 Bal

Bad Debt Expense Allow. For T-account Posting: 1400

Bal 1400 6/24/12

Furniture

and equipment is depreciated based on a 6-year life (no salvage value). Entry

Adjusting

Deprec. Exp.-Furniture & Equipment 14,000

Accumulated & Deprec. Furn. Accumulate Depreciatio Exp. Equip. d n Depreciation..14,000 14,000 Bal T-Account Posting: 35,000 6/24/12 Adj

Insurance

expired during the year

$2,550.

Adjusting entry:
Insurance Expense...2550 Prepaid Insurance..2550

INSURANCE EXPENSE T-account posting: Adj. 5100 Adj. 2550 2550 6/24/12 Bal

PREPAIDINSURANCE

Interest

accrued on notes payable

$3,360
Adjusting

Entry to record interest on note payable:

Interest Expense.3360 Interest Payable3360 Interest Payable 3660

Interest Expense T-Account Postings: 3660

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Sales

salaries earned but not paid $2,400.

SalariesPayable 2,400

SalesExpense Salaries Bal. 50,000 Cls. 52,400 2,400

AdvertisingExpense PrepaidExpense 52,400 Advertising Bal. 6,700 700 Advertising paid in advance $700.
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Cls. 6,000

700

Closing Entries

Dec. 31 Sales 600,000 Income Summary

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Kieso, D., Warfield, T., Weygandt, J. (2007). Intermediate Accounting. Hoboken, NJ., John Wiley and Sons.
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References

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