### Estimated bad debts should be equal to 5 percent

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##### Reference no: EM13488974

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 Receivables are 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

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