It is now the end of the financial year and Fred requires you to undertake the following: Prepare the Balance Day Adjustment Journals for the 'Shore Read' where required. The journals must be correctly formatted and include a narration (explanation) for each journal entry.
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.
![QUESTION 1: Balance Day Adjustments
Fred Jones is the sole proprietor of 'Shore Read', a second hand book and coffee shop situated on the
esplanade of a popular beach. The "Shore Read' has become extremely popular with locals and
holidaymakers due to the excellent coffee, special recipe chocolate fudge brownies and the extensive
range of reasonably priced books.
When Fred is in the shop he is very busy running the coffee shop and on Monday and Tuesdays he
travels widely to source good second hand books to sell in the shop. He has become so busy that he is
unable to attend to the bookkeeping, so he has recently hired Michell & Co Accounting Specialists Pty
Ltd to take over the accounting function.
You are the graduate accountant working at Michell & Co Accounting Specialists Pty Ltd and are now
responsible for preparing the year end Balance Day Adjustment journals for "Shore Read'. Fred Jones
has provided you with the Shore Read's' Unadjusted Trial Balance but unfortunately he doesn't know
what order the accounts should be in.
Debit ($)
Credit ($)
Shore Read
Unadjusted Trial Balance
30 June 2020
Shop Cleaning Expense
Gas Expense
Water Expense
18 000
2 387
3 001
Motor Vehicle
85 104
Cash at 8ank
27 400
Term Deposit
140 000
Prepaid Insurance
1 536
85 000
Shop Furniture & Fittings
Sales Returns & Allowances
848
Interest expense
7 360
Discount Received
1 336
Electricity Expense
Sam, Capital
Accounts Receivable
5 920
211 580
S20
Loan
62 840
Accumulated Depreciation - Shop Furniture &
Fittings
Inventory (1 July 2019)
Rent Expense
7 200
47 160
24 204
Bookkeepers Wages Expense
Coffee Shop Staff Wages Expense
Bookshop Staff Wages Expense
33 163
58 272
50 000
Purchases
161 400
Advertising Expense
Office Cleaning Expense
Accounts Payable
Office Supplies Expense
Fred Jones, Drawings
19 760
16 000
8 185
2 026
42 452
8 560
Repairs and Maintenance Payable
- Coffee Shop
Book Shop
Sales
362 824
Sales
145 200
Accumulated Depreciation – Motor Vehicle
Accrued Rent
26 100
1 800
Discount Allowed
Insurance Expense
Totals
1 040
3 072
835 625
835 625
Fred has emailed you the following list of account information related to the year ended 30 June
2020. He is not sure if all of the following transactions require Balance Day Adjustment journals or
not, but he is onfident that you will know:](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F17ecff1c-bdbc-418f-9021-ecec2b23b393%2F7195ce5d-bcfb-4b81-b1b6-a22a1db02c66%2Firlebr_processed.jpeg&w=3840&q=75)
![The Shop Furniture & Fittings is expected to have a useful life of five years and have a
residual value of $12,500.
(1)
(2)
Fred records all office supplies purchases initially as an expense. Fred counts the Office
Supplies and determines that there is $232 on hand at 30 June 2020.
(3)
The 6 month insurance policy (policy #34448) of $1 536 was paid on March 1 2020.
(4)
The Motor Vehicle is expected to have a useful life of six years and have a zero scrap value.
$16 563 of the recorded sales represent payments made by customers to the Shore Read' to
source hard to find books such as first editions. As at 30 June 2020, Fred had not yet been
able to source these difficult to find books during his weekly book buying trips.
(S)
On 30 June, Fred estimated $80 of the Accounts Receivable will not be collected as the
amount has been outstanding for 190 days.
(6)
Staff wages payable but not recorded as at 30 June are $4 106. Of this $3 000 was coffee
shop staff wages payable whilst the remaining amount was bookshop staff wages payable.
(7)
(8)
The bank has approved an overdraft facility for $5 500 for the Shore Read".
(9)
$18,000 of the loan principal is due to be paid by 1 June 2021.
REQUIRED:
It is now the end of the financial year and Fred requires you to undertake the following:
Prepare the Balance Day Adjustment Journals for the 'Shore Read' where required. The journals
must be correctly formatted and include a narration (explanation) for each journal entry.
Prepare the Balance Day Adjustment Journals for the "Shore Read' where required. Include
narration (explanation) for each journal entry.
a.
Date
Details
Debit ($)
Credit ($)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F17ecff1c-bdbc-418f-9021-ecec2b23b393%2F7195ce5d-bcfb-4b81-b1b6-a22a1db02c66%2Fc6c439s_processed.jpeg&w=3840&q=75)
![](/static/compass_v2/shared-icons/check-mark.png)
Step by step
Solved in 2 steps with 1 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
![Horngren's Cost Accounting: A Managerial Emphasis…](https://www.bartleby.com/isbn_cover_images/9780134475585/9780134475585_smallCoverImage.gif)
![Intermediate Accounting](https://www.bartleby.com/isbn_cover_images/9781259722660/9781259722660_smallCoverImage.gif)
![Financial and Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781259726705/9781259726705_smallCoverImage.gif)