A/C Name Trial Balance DR CR Cash 560,000 Accounts receivable 3,710,000 Allowance for bad debt 290,000 Merchandise Inventory 2,580,000 Store Supplies 1,300,000 Prepaid Insurance 2,775,000 Prepaid rent 1,000,000 Furniture 2,650,000 Accumulated deprecation-Furniture 2,080,000 Machinery 1,800,000 Accumulated depreciation- Machinery 1,328,141 Accounts payable 630,000 Salary payable Interest payable Unearned Sales revenue 800,000 Note Payable, long term 2,500,000 Patty Patterson, Capital 5,200,000 Patty Patterson, Withdrawals 280,000 Sales revenue 22,726,859 Sales discount 1,200,000 Sales returns and allowances 800,000 Cost of goods sold 8,100,000 Salaries expense 7,270,000 Insurance Expense Utilities Expense 580,000 Rent Expense 950,000 Depreciation Expense – Furniture Depreciation Expense – Machinery Store Supplies Expense Gain on Disposal of Machinery Bad-Debt Expense Interest Expense 35,555,000 35,555,000 The Pizza and Coffee Company Trial Balance as of December 31, 2020 The following additional information is available December 31, 2020: Store Supplies on hand on December 31, 2020, amounted to $255,500. Insurance of $2,775,000 was paid on January 1, 2020, for the 15-months to March 31, 2021 Prepaid rent expired December 31, 2020, amounts to $850,000 The furniture and fixtures have an estimated useful life of 10 years and is being depreciated on the straight-line method down to a residual value of $50,000. The machinery cost includes two coffee drink machines purchased for $900,000 each by the company on January 1, 2014. The double-declining balance method of depreciation is used to compute the machinery’s depreciation charges and their expected useful life is 10 years or 100,000 drinks. In 2014, 5,000 drinks were sold, 6,500 in 2015, 7,800 in 2016, 9,000 in 2017, 11,500 in 2018, 12,800 in 2019 and 15,900 sold in 2020. The residual value on both machines is $96,637 each. On September 1, 2020, the company sold one of the coffee drinks machines for $480,000 cash. Salaries earned by employees and not yet paid amounted to $180,000 on Dec 31, 2020. Accrued interest expense as of December 31, 2020, $98,000. On Dec 31, 2020, $695,000 of the previously unearned sales revenue had been earned The aging of the Accounts Receivable schedule on Dec 31, 2020, indicated that the Allowance for Bad Debts should be $371,000 A physical count of inventory was done on December 31, 2020, after making all the other adjustments and this revealed that there was $2,400,000 worth of inventory on hand at this point. Other data: The business is expected to make principal payments totalling $400,000 towards the loan during the fiscal year to December 31,2021. Required: Prepare the necessary adjusting journal entries on Dec 31, 2020. [Narrations are not required] Prepare the Adjusted Trial balance for the period ending December 31, 2020. Using the Adjusted trial balance, generate the statements requested by Ready Cash, i.e. A Multiple-step income statement & a Statement of owner’s equity for the year ended December 31, 2020 A Classified balance sheet, in report format, at December 31, 2020.
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/C Name |
|
|
|
|
DR |
CR |
|
Cash |
560,000 |
|
|
|
3,710,000 |
|
|
Allowance for bad debt |
|
290,000 |
|
Merchandise Inventory |
2,580,000 |
|
|
Store Supplies |
1,300,000 |
|
|
Prepaid Insurance |
2,775,000 |
|
|
Prepaid rent |
1,000,000 |
|
|
Furniture |
2,650,000 |
|
|
Accumulated deprecation-Furniture |
|
2,080,000 |
|
Machinery |
1,800,000 |
|
|
|
|
1,328,141 |
|
Accounts payable |
|
630,000 |
|
Salary payable |
|
|
|
Interest payable |
|
|
|
Unearned Sales revenue |
|
800,000 |
|
Note Payable, long term |
|
2,500,000 |
|
Patty Patterson, Capital |
|
5,200,000 |
|
Patty Patterson, Withdrawals |
280,000 |
|
|
Sales revenue |
|
22,726,859 |
|
Sales discount |
1,200,000 |
|
|
Sales returns and allowances |
800,000 |
|
|
Cost of goods sold |
8,100,000 |
|
|
Salaries expense |
7,270,000 |
|
|
Insurance Expense |
|
|
|
Utilities Expense |
580,000 |
|
|
Rent Expense |
950,000 |
|
|
Depreciation Expense – Furniture |
|
|
|
Depreciation Expense – Machinery |
|
|
|
Store Supplies Expense |
|
|
|
Gain on Disposal of Machinery |
|
|
|
Bad-Debt Expense |
|
|
|
Interest Expense |
|
|
|
|
35,555,000 |
35,555,000 |
The Pizza and Coffee Company
Trial Balance as of December 31, 2020
The following additional information is available December 31, 2020:
- Store Supplies on hand on December 31, 2020, amounted to $255,500.
- Insurance of $2,775,000 was paid on January 1, 2020, for the 15-months to March 31,
2021
- Prepaid rent expired December 31, 2020, amounts to $850,000
- The furniture and fixtures have an estimated useful life of 10 years and is being
depreciated on the straight-line method down to a residual value of $50,000. - The machinery cost includes two coffee drink machines purchased for $900,000 each by
the company on January 1, 2014. The double-declining balance method of depreciation is used to compute the machinery’s depreciation charges and their expected useful life is 10 years or 100,000 drinks. In 2014, 5,000 drinks were sold, 6,500 in 2015, 7,800 in 2016, 9,000 in 2017, 11,500 in 2018, 12,800 in 2019 and 15,900 sold in 2020. The residual value on both machines is $96,637 each. On September 1, 2020, the company sold one of the coffee drinks machines for $480,000 cash.
- Salaries earned by employees and not yet paid amounted to $180,000 on Dec 31, 2020.
- Accrued interest expense as of December 31, 2020, $98,000.
- On Dec 31, 2020, $695,000 of the previously unearned sales revenue had been earned
- The aging of the Accounts Receivable schedule on Dec 31, 2020, indicated that the
Allowance for
- A physical count of inventory was done on December 31, 2020, after making all the other adjustments and this revealed that there was $2,400,000 worth of inventory
on hand at this point.
Other data:
- The business is expected to make principal payments totalling $400,000 towards the loan during the fiscal year to December 31,2021.
Required:
- Prepare the necessary
adjusting journal entries on Dec 31, 2020.
[Narrations are not required]
- Prepare the Adjusted Trial balance for the period ending December 31, 2020.
- Using the Adjusted trial balance, generate the statements requested by Ready Cash, i.e.
- A Multiple-step income statement & a Statement of owner’s equity for the year ended December 31, 2020
- A Classified
balance sheet , in report format, at December 31, 2020.
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