e Period Ended December 31, 2020 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.
| Given Data: | ||||
| MAGLIOCHETTI MOVING CORP. | ||||
| Statement of Earnings | |
|||
| For the Period Ended December 31, 2020 | At December 31, 2020 | |||
| Transportation revenue | $ 85,000 | Assets | ||
| Expenses: | Cash | $ 2,000 | ||
| Salaries expense | 17,000 | Receivables | 3,000 | |
| Maintenance expense | 12,000 | Inventory of maintenance supplies | 6,000 | |
| Other expenses | 18,000 | Equipment | 40,000 | |
| Total expenses | $ 47,000 | Prepaid insurance | 4,000 | |
| Net earnings | $ 38,000 | Other assets | 27,000 | |
| Total assets | $82,000 | |||
| Liabilities | ||||
| Accounts payable | $ 9,000 | |||
| Shareholders' Equity | ||||
| Contributed capital (10,000 shares outstanding) | 35,000 | |||
| |
38,000 | |||
| Total liabilities and shareholders' equity | $82,000 | |||
| Additional information: | ||||
| Number of shares | 10,000 | |||
| (a) | Maintenance supplies on hand, December 31, 2020 | $ 1,800 | ||
| (b) | Prepaid insurance at December 31, 2020 | $ 2,000 | ||
| (Total insurance premium paid in 2020 was debited to Prepaid Insurance) | ||||
| (c) | Cost of equipment purchased on January 1, 2020 | $40,000 | ||
| Unrecorded |
$ 5,000 | |||
| (d) | Unpaid (and unrecorded) salaries at December 31, 2020 | $ 2,200 | ||
| (e) | At December 31, 2020, transportation revenue collected in advance (credited to Transportation Revenue when cash was received) | $ 7,000 | ||
| (f) | Income tax rate | 30% | ||
| Accounts | ||||
| Cash | ||||
| Receivables | ||||
| Inventory of maintenance supplies | ||||
| Equipment | ||||
| Prepaid insurance | ||||
| Other assets | ||||
| Accounts payable | ||||
| Salaries payable | ||||
| Deferred transportation revenue | ||||
| Income tax payable | ||||
| Contributed capital | ||||
| Retained earnings | ||||
| Transportation revenue | ||||
| Salaries expense | ||||
| Maintenance expense | ||||
| Depreciation expense | ||||
| Other expenses | ||||
| Income tax expense | ||||
| Financial Statement Effects | ||||
| + A | ||||
| – A | ||||
| +XA → –A | ||||
| + L | ||||
| – L | ||||
| + SE | ||||
| – SE | ||||
| +R → +SE | ||||
| –R → –SE | ||||
| +E → –SE | ||||
| –E → +SE | ||||
Choose 2 out of 6 transactions, from the list of
Record your 2 selected adjusting entry transactions in MAGLIOCHETTI Journal (Part 1) worksheet.
Explanations are required for each transaction.
Be sure to use the corresponding letter of the transactions you choose to the one for the
Step by step
Solved in 3 steps
