# BUSI 2001 Assignment 1 – AIS, Cash, Accounts Receivable

BUSI 2001 – Intermediate Accounting 1 – Fall 2017
Assignment 1 – AIS, Cash, Accounts Receivable

Problem 1

The balance in the prepaid insurance account at December 31, 20×4 of \$166,000 consists of three insurance policies:

Policy Effective Date Expiry Date Amount
A Jan 1, 20×4 June 30, 20×5 \$114,000
B March 31, 20×4 March 31, 20×5 72,000
C August 31, 20×4 August 31, 20×6 132,000

During the current year, 20×5, the following new policies were purchased.

Policy Effective Date Expiry Date Amount
A (renewal) June 30, 20×5 December 31, 20×6 \$124,200
B (renewal) March 31, 20×5 March 31, 20×6 74,400
D May 31, 20×5 December 31, 20×6 79,800

Required – Write one adjusting journal entry to adjust the prepaid insurance/insurance expense accounts at December 31, 20×5.

Problem 2

A company’s cash account was last reconciled on November 30, 20×5. The unadjusted cash balance at December 31, 20×5 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, 20×5 were \$46,520
• The December 30, 20×5 and December 31, 20×5 deposits of \$45,990 and \$32,405 were recorded by the bank on January 2, 20×6
• 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, 20×5 was \$178,564.

Required - Prepare the adjusting journal entries and a bank reconciliation as at December 31, 20×5.

Problem 3

The unadjusted trial balance as at December 31, 20×5 shows a credit balance in the doubtful accounts of \$35,500. This balance is the December 31, 20×4 balance. During 20×5, 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, 20×5.

Here’s the SOLUTION

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