1) Accrued warranty costs should be recorded in an amount equal
to 1% of gross sales. Gross sales...

Question

1) Accrued warranty costs should be recorded in an amount equal
 to 1% of gross sales. Gross sales are 737,500.

2) Estimated
 bad debts should be equal to 5% of Accounts receivable. Accounts Receivablesare 120,000.

3) The
 market value of inventory calculated under lower of cost or market is
 $55,000. In the trial balance it states 60,000.

4) Interest
 should be accrued on the Notes Payable:

The 1 year note payable has an
 interest rate of 8% & was issued on December 6, 2011. The 1 year note payable on the trial balance is 60,000.

5)
 Depreciation needs to be recorded for 2011, none of the assets has an
 estimated residual value & the company uses straight-line:

Equipment - $180,000 purchased
 7/1/10 has a 5 year life

Equipment - $20,000 purchased 1/1/11
 has a 5 year life

Equipment - $60,000 purchased
 12/6/11 has a 5 year life

Furniture - $45,000 purchased
 12/1/10 has a 10 year life

Truck - $60,000 purchased 7/1/10 has
 a 5 year life

David · Accepted Answer

JOURNAL ENTRIES 
1)  ACCRUED WARRANTY COSTS: 
WARRANTY EXPENSES A/C ----DR.                                        $7375 
          TO ACCRUED WARRANTY LIABILITIES A/C…CR                                $7375 
(**1% OF 737500=7375) 
2) ESTIMATED BAD DEBT: 
PROFIT & LOSS A/C ……DR.                                                     $6000 
         TO PROVISION FOR BAD DEBT A/C…..CR                                            $6000 
(**5% OF 120000=6000)
3) PURCHASE A/C---DR.

1) Accrued warranty costs should be recorded in an amount equal to 1% of gross sales. Gross sales are 737,500. 2) Estimated bad debts should be equal to 5% of Accounts receivable. Accounts...

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