For each of the following separate cases, prepare adjusting entries required of financial statements for the year ended (date of) December 31. Entries can draw from the following partial chart of accounts: Cash; Interest Receivable; Supplies; Prepaid Insurance; Equipment; Accumulated Depreciation—Equipment; Wages Payable; Interest Payable; Unearned Revenue; Interest Revenue; Wages Expense; Supplies Expense; Insurance Expense; Interest Expense; and Depreciation Expense—Equipment. a. Wages of $8,000 are earned by workers but not paid as of December 31. b. Depreciation on the company’s equipment for the year is $18,000. c. The Supplies account had a $240 debit balance at the beginning of the year. During the year, $5,200 of supplies are purchased. A physical count of supplies at December 31 shows $440 of supplies available. d. The Prepaid Insurance account had a $4,000 balance at the beginning of the year. An analysis of insurance policies shows that $1,200 of unexpired insurance benefits remain at December 31. e. The company has earned (but not recorded) $1,050 of interest revenue for the year ended December 31. The interest payment will be received 10 days after the year-end on January 10. f. The company has a bank loan and has incurred (but not recorded) interest expense of $2,500 for the year ended December 31. The company will pay the interest five days after the year-end on January 5.
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.
For each of the following separate cases, prepare
year ended (date of) December 31. Entries can draw from the following partial chart of accounts: Cash;
Interest Receivable; Supplies; Prepaid Insurance; Equipment;
Wages Payable; Interest Payable; Unearned Revenue; Interest Revenue; Wages Expense; Supplies
Expense; Insurance Expense; Interest Expense; and Depreciation Expense—Equipment.
a. Wages of $8,000 are earned by workers but not paid as of December 31.
b. Depreciation on the company’s equipment for the year is $18,000.
c. The Supplies account had a $240 debit balance at the beginning of the year. During the year, $5,200
of supplies are purchased. A physical count of supplies at December 31 shows $440 of supplies
available.
d. The Prepaid Insurance account had a $4,000 balance at the beginning of the year. An analysis of insurance
policies shows that $1,200 of unexpired insurance benefits remain at December 31.
e. The company has earned (but not recorded) $1,050 of interest revenue for the year ended December
31. The interest payment will be received 10 days after the year-end on January 10.
f. The company has a bank loan and has incurred (but not recorded) interest expense of $2,500 for the
year ended December 31. The company will pay the interest five days after the year-end on January 5.
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