# Woodlawn Case Part 3

Case Part 3 Report for the CFO There are several necessary journal entries that have been made to adjust the unadjusted trial balance. For Allowance for doubtful accounts: 1. In 2009, \$ 58,621. 84 was directly written off to bad debt expense reflecting the amounts owed by customers who had gone bankrupt during the year. The journal entry would have been recorded as Dr Bad debt expense 58,621. 84 Cr Account receivable 58,621. 84 To record the uncollectable amount due to customer bankruptcy.

Based on the information Michael provided, the worse of the recession is over and current economic conditions have improved since last month. 2. Customers are paying slower then previous years due to bad economic conditions. Therefore the percentage of AFDA should fall in a range among percentages of 2008-2009, which is 4. 9%-13. 1%. We estimate 11% to be a better choice. The total amount of AFDA ending balance is 11%* \$374,692. 53=\$41,216. 18 In order to calculate the AFDA amount needed to adjust, we need the AFDA opening balance which is \$35,000 from trial balance, the correction of error made in write-off \$58,621. 4. \$ 58,621. 84| \$35,000 ? | \$41,216. 18| ADFA ? = \$41,216. 18+\$58,621. 84-\$35,000=\$64,838. 02 The adjusted entry is made based on the previous information, Dr Bad debt expense 64,838. 02 Cr Allowance for doubtful accounts 64,838. 02 To record the adjustment made for Allowance for doubtful accounts at the fiscal year end. For Insurance: Calculation of the adjustment of prepaid expenses at the year end: Prepaid insurance for the beginning of September 1, 2009: \$9,300 Insurance from Fife Insurance:

Policy Period: 2010/05/20-2011/05/20 Amount: \$12,885. 48 For the period beginning at Sept, 1 2009, to year end at August 31,2010 is 103 days in total, Total Insurance expense = \$12,885. 48* 103/365=\$3,636. 18 Balance required at year end=\$12,885. 48-\$3,636. 18=\$9,249. 30 Prepaid expense adjustments =\$9,300-\$9,249. 30=\$50. 70 The adjusted entry is made based on the previous calculation, Dr Insurance expense \$50. 70 Cr Prepaid insurance\$50. 70 To record the adjustment of prepaid insurance

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