ACCT 3101-Handout Problem #1-Spring 2011

ACCT 3101-Handout Problem #1-Spring 2011 - Prior to 2009,...

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Handout #1 Ungraded January 28, 2011 Presented on the spreadsheet file is information pertaining to Scrug Specialty Shops, a calendar year sole proprietorship, which maintains its books on the cash basis during the year. At 12/31/09, however, Kerri Scrug’s needs her books adjusted to the accrual basis because of a bank loan application. The information on the spreadsheet has been prepared on the cash basis. Amounts in parenthesis represent credits. For example the $187,000 credit (revenue under the cash basis) balance in the sales account represents cash collected from customers during the year. The $8,400 debit balance in the rent account represents the amount paid for rent during the year. In addition to the information prepared on the cash basis on the spreadsheet, Kerri has the following information: 1. Amounts due from customers on 12/31/09 are $7,400. 2. A review of the receivables at December 31, 2009, disclosed that an allowance for doubtful accounts of $600 should be provided.
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Unformatted text preview: Prior to 2009, Scrug had no losses from bad debts. 3. The inventory amounted to $24,000 on 12/31/09, based on a physical count. 4. On October 1, 2009, Scrug paid $8,400, representing one years rent in advance for the 12 months ending October 1, 2010. $7,500 was paid on October 1, 2008 for the 12 months ended on October 1, 2009.(B30) 5. On April 1, 2009, Scrug paid $2,400 to renew a one-year insurance policy. On October 1, 2008, the premium paid on the old policy was $2,160. The old policy expired on April 1, 2009. 6. Depreciation on equipment was computed at $5,250 for 2009. 7. Unpaid vendor invoices for purchases totaled $7,800 at December 31, 2009. 8. Accrued expenses at 12/31/08 and 12/31/09 are as follows: 12/31/08 12/31/09 Payroll taxes $250 $400 Salaries 375 510 Utilities 275 450 Directions: Complete the attached spreadsheet to convert Scrugs records from the cash basis to the accrual basis. Debits are not in parentheses. Credits are shown in parentheses....
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