Chapter Three Exercise: Adjusting Journal Entries Devin Wolf Company has the following balances in selected accounts on December 31, 2020. Accounts Receivable $ –0– Accumulated Depreciation—Equipment –0– Equipment 7,000 Interest Payable –0– Notes Payable 10,000 Prepaid Insurance 2,100 Salaries and Wages Payable –0– Supplies 2,450 Unearned Service Revenue 30,000 All the accounts have normal balances. The information below has been gathered at December 31, 2020. 1. Devin Wolf Company borrowed $10,000 by signing a 9%, one-year note on September 1, 2019. 2. A count of supplies on December 31, 2020, indicates that supplies of $900 are on hand. 3. Depreciation on the equipment for 2020 is $1,000. 4. Devin Wolf Company paid $2,100 for 12 months of insurance coverage on June 1, 2020. 5. On December 1, 2020, Devin Wolf collected $32,000 for consulting services to be performed from December 1, 2020, through March 31, 2021. 6. Devin Wolf performed consulting services for a client in December 2020. The client will be billed $4,200. 7. Devin Wolf Company pays its employees total salaries of $9,000 every Monday for the preceding 5-day week (Monday through Friday). On Monday, December 29, employees were paid for the week ending December 26. All employees worked the last 3 days of 2020. Instructions Prepare adjusting entries for the seven items described above.
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.
Chapter Three Exercise: Adjusting Journal Entries
Devin Wolf Company has the following balances in selected accounts on December 31, 2020.
Equipment 7,000
Interest Payable –0–
Notes Payable 10,000
Prepaid Insurance 2,100
Salaries and Wages Payable –0–
Supplies 2,450
Unearned Service Revenue 30,000
All the accounts have normal balances. The information below has been gathered at December 31, 2020.
1. Devin Wolf Company borrowed $10,000 by signing a 9%, one-year note on September 1, 2019.
2. A count of supplies on December 31, 2020, indicates that supplies of $900 are on hand.
3. Depreciation on the equipment for 2020 is $1,000.
4. Devin Wolf Company paid $2,100 for 12 months of insurance coverage on June 1, 2020.
5. On December 1, 2020, Devin Wolf collected $32,000 for consulting services to be performed from December 1, 2020, through March 31, 2021.
6. Devin Wolf performed consulting services for a client in December 2020. The client will be billed $4,200.
7. Devin Wolf Company pays its employees total salaries of $9,000 every Monday for the preceding 5-day week (Monday through Friday). On Monday, December 29, employees were paid for the week ending December 26. All employees worked the last 3 days of 2020.
Instructions Prepare
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