A partial trial balance of Julie Hartsack Corporation is as follows on December 31, 2021. Dr. Cr. Supplies $ 2,700 Salaries and wages payable $ 1,500 Interest receivable 5,100 Prepaid insurance 90,000 Unearned rent –0– Interest payable 15,000 Additional adjusting data: 1. A physical count of supplies on hand on December 31, 2021, totaled $1,100. 2. Through oversight, the Salaries and Wages Payable account was not changed during 2021. Accrued salaries and wages on December 31, 2021, amounted to $4,400. 3. The Interest Receivable account was also left unchanged during 2021. Accrued interest on investments amounts to $4,350 on December 31, 2021. 4. The unexpired portions of the insurance policies totaled $65,000 as of December 31, 2021. 5. $28,000 was received on January 1, 2021, for the rent of a building for both 2021 and 2022. The entire amount was credited to rent revenue. 6. Depreciation on equipment for the year was erroneously recorded as $5,000 rather than the correct figure of $50,000. 7. A further review of depreciation calculations of prior years revealed that equipment depreciation of $7,200 was not recorded. It was decided that this oversight should be corrected by a prior period adjustment. Instructions a. Assuming that the books have not been closed, what are the adjusting entries necessary at December 31, 2021? (Ignore income tax considerations.) b. Assuming that the books have been closed, what are the adjusting entries necessary at December 31, 2021? (Ignore income tax considerations.) c. Repeat the requirements for items 6 and 7, taking into account income tax effects (40% tax rate) and assuming that the books have been closed.
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
A partial
|
|
Dr.
|
Cr.
|
|
Supplies
|
$ 2,700
|
|
|
Salaries and wages payable
|
|
$ 1,500
|
|
Interest receivable
|
5,100
|
|
|
Prepaid insurance
|
90,000
|
|
|
Unearned rent
|
|
–0–
|
|
Interest payable
|
|
15,000
|
Additional adjusting data:
- 1. A physical count of supplies on hand on December 31, 2021, totaled $1,100.
- 2. Through oversight, the Salaries and Wages Payable account was not changed during 2021. Accrued salaries and wages on December 31, 2021, amounted to $4,400.
- 3. The Interest Receivable account was also left unchanged during 2021. Accrued interest on investments amounts to $4,350 on December 31, 2021.
- 4. The unexpired portions of the insurance policies totaled $65,000 as of December 31, 2021.
- 5. $28,000 was received on January 1, 2021, for the rent of a building for both 2021 and 2022. The entire amount was credited to rent revenue.
- 6.
Depreciation on equipment for the year was erroneously recorded as $5,000 rather than the correct figure of $50,000. - 7. A further review of depreciation calculations of prior years revealed that equipment depreciation of $7,200 was not recorded. It was decided that this oversight should be corrected by a prior period adjustment.
Instructions
a. Assuming that the books have not been closed, what are the
b. Assuming that the books have been closed, what are the adjusting entries necessary at December 31, 2021? (Ignore income tax considerations.)
c. Repeat the requirements for items 6 and 7, taking into account income tax effects (40% tax rate) and assuming that the books have been closed.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
