Account balances taken from the ledger of Builders’ Supply Corporation on December 31, 2015, before adjustment, follow information relating to adjustments on December 31, 2015: (a) Allowance for Bad Debts is to be increased to a balance of $3,000. (b) Buildings are depreciated at the rate of 5% per year. (c) Accrued selling expenses are $3,840. (d) There are supplies of $780 on hand. (e) Prepaid insurance relating to 2016 totals $720. (f) Accrued interest on long-term investments is $240. (g) Accrued real estate and payroll taxes are $900. (h) Accrued interest on the mortgage is $480. (i) Income taxes are estimated to be 20% of the income before income taxes. Cash $24,000 Dividends $13,400 Accounts Receivable 72,000 Sales 246,000 Allowances for Bad debts 1,380 Sales Returns 4,360 Inventory 87,570 Sales Discounts 5,400 Long term -Investments 15,400 Costs of Goods sold 114,370 Land 69,600 Selling Expenses 49,440 Bulidings 72,000 Office Expenses 21,680 Accumulated Depreciation-Buildings 19,800 Insurance Expense 1,440 Accounts Payable 35,000 Supplies Expense 5,200 Mortgage Payable 68,800 Taxes-Real Estate and Payroll 7,980 Capial Stock $10par 180,000 Interest Revenue 660 Retained Earning, December 31,2014 14,840 Interest Expense 2,640 INSTRUCTIONS: Prepare a trial balance. Journalize the adjustments. Journalize the closing entries. Prepare a post-closing trial balance. (Note: Although not required, the use of a spreadsheet is recommended for the solution of this problem.)
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.
Account balances taken from the ledger of Builders’ Supply Corporation on December 31, 2015, before adjustment, follow information relating to adjustments on December 31, 2015:
- (a)
Allowance for
Bad Debts is to be increased to a balance of $3,000. - (b)
Buildings are
depreciated at the rate of 5% per year. - (c)
Accrued selling expenses are $3,840.
- (d)
There are supplies of $780 on hand.
- (e)
Prepaid insurance relating to 2016 totals $720.
- (f)
Accrued interest on long-term investments is $240.
- (g)
Accrued real estate and payroll taxes are $900.
- (h)
Accrued interest on the mortgage is $480.
- (i)
Income taxes are estimated to be 20% of the income before income taxes.
-
Cash $24,000 Dividends $13,400 Accounts Receivable 72,000 Sales 246,000- Allowances for Bad debts 1,380 Sales Returns 4,360
- Inventory 87,570 Sales Discounts 5,400
- Long term -Investments 15,400 Costs of Goods sold 114,370
- Land 69,600 Selling Expenses 49,440
- Bulidings 72,000 Office Expenses 21,680
Accumulated Depreciation -Buildings 19,800 Insurance Expense 1,440- Accounts Payable 35,000 Supplies Expense 5,200
- Mortgage Payable 68,800 Taxes-Real Estate and Payroll 7,980
- Capial Stock $10par 180,000 Interest Revenue 660
Retained Earning , December 31,2014 14,840 Interest Expense 2,640
INSTRUCTIONS:
-
Prepare a
trial balance . -
Journalize the adjustments.
-
Journalize the closing entries.
-
Prepare a post-closing trial balance.
(Note: Although not required, the use of a spreadsheet is recommended for the solution of this problem.)
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