Jordan Company’s annual accounting year ends on December 31. It is now December 31, 2018, and all of the 2018 entries have been made except for the following: The company owes interest of $700 on a bank loan. The interest will be paid when the loan is repaid on September 30, 2019. No interest has been recorded. On September 1, 2018, Jordan collected six months’ rent of $4,800 on storage space. At that date, Jordan debited Cash and credited Deferred Revenue for $4,800. The company earned service revenue of $3,300 on a special job that was completed December 29, 2018. Collection will be made during January 2019. No entry has been recorded. On November 1, 2018, Jordan paid a one-year premium for property insurance of $4,200, for coverage starting on that date. Cash was credited and Prepaid Insurance was debited for this amount. At December 31, 2018, wages earned by employees but not yet paid totaled $1,100. The employees will be paid on the next payroll date, January 15, 2019. Depreciation of $1,000 must be recognized on a service truck purchased this year. The income after all adjustments other than income taxes was $30,000. The company's income tax rate is 30%. Compute and record income tax expense.
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.
Jordan Company’s annual accounting year ends on December 31. It is now December 31, 2018, and all of the 2018 entries have been made except for the following:
- The company owes interest of $700 on a bank loan. The interest will be paid when the loan is repaid on September 30, 2019. No interest has been recorded.
- On September 1, 2018, Jordan collected six months’ rent of $4,800 on storage space. At that date, Jordan debited Cash and credited Deferred Revenue for $4,800.
- The company earned service revenue of $3,300 on a special job that was completed December 29, 2018. Collection will be made during January 2019. No entry has been recorded.
- On November 1, 2018, Jordan paid a one-year premium for property insurance of $4,200, for coverage starting on that date. Cash was credited and Prepaid Insurance was debited for this amount.
- At December 31, 2018, wages earned by employees but not yet paid totaled $1,100. The employees will be paid on the next payroll date, January 15, 2019.
Depreciation of $1,000 must be recognized on a service truck purchased this year.- The income after all adjustments other than income taxes was $30,000. The company's income tax rate is 30%. Compute and record income tax expense.
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