Kevin & Friends, Inc., which was organized on January 2, 2018, two years ago, has not maintained complete books. The following data were obtained from available records. The company’s post-closing trial balance as at December 31, 2019 was reconstructed as follows: Debit Credit Cash P32,000 Accounts receivable 78,000 Allowance for doubtful accounts 3,000 Inventory 58,000 Unused supplies 1,400 Furniture and equipment 55,000 Accumulated depreciation 16,500 Accounts payable 69,000 Loan payable – bank 20,000 Accrued miscellaneous expenses 2,600 Unearned rent income 900 Capital stock, 1,000 shares, P100 par value 100,000 Retained earnings 12,400 P224,400 P224,400 The cash records showed the following information: Cash receipts during 2020: Cash sales P 35,000 Collections on credit sales (after returns and allowances of P4,000) 446,000 Sale, on July 1, 2020, of equipment costing P6,000 on which depreciation of P1,500 had accumulated 5,500 Bank loan proceeds, after deducting interest of P700 9,300 Rent income (sublease of premises) 1,500 P497,300 Cash disbursements during 2020: Cash purchases P 20,000 Payments on accounts payable, after purchase returns and allowances of P3,000 315,000 Expenses paid: Salaries 92,000 Rent 18,000 Utilities 5,000 Supplies 6,000 Taxes 8,500 Miscellaneous expenses 9,600 Equipment purchased on July 1, 2020 10,000 Dividends paid 5,000 P489,100 Other information gathered: Inventory at December 31, 2020 increased by 35% over that of the preceding yearend. Depreciation of furniture and equipment is recorded on a monthly basis at 10% a year. Unused supplies at the end of the year, P600. Unpaid miscellaneous expenses at December 31, 2020, P3,100. Rent received in advance on December 31, 2020, P600. Prepaid interest at yearend, P300. Balances at December 31, 2020 for accounts with trade debtors and creditors are ascertained to be as follows: Accounts receivable (of which 6% are estimated to be bad), P92,000. Accounts payable, P84,000 During the year, P1,900 of customers’ accounts were written off as uncollectible. Based on the information above, answer the following: How much is the credit sales for the year ended December 31, 2020? How much is the credit purchases for the year ended December 31, 2020? How much is the gross profit for the year ended December 31, 2020? How much is the gain on sale of equipment for the year ended December 31, 2020? How much is the rent income for the year ended December 31, 2020? How much is the total current assets as of December 31, 2020? How much is the retained earnings as of 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.
Kevin & Friends, Inc., which was organized on January 2, 2018, two years ago, has not maintained complete books. The following data were obtained from available records.
The company’s post-closing
| Debit | Credit | |
| Cash | P32,000 | |
| 78,000 | ||
| Allowance for doubtful accounts | 3,000 | |
| Inventory | 58,000 | |
| Unused supplies | 1,400 | |
| Furniture and equipment | 55,000 | |
| 16,500 | ||
| Accounts payable | 69,000 | |
| Loan payable – bank | 20,000 | |
| Accrued miscellaneous expenses | 2,600 | |
| Unearned rent income | 900 | |
| Capital stock, 1,000 shares, P100 par value | 100,000 | |
| 12,400 | ||
| P224,400 | P224,400 |
The cash records showed the following information:
| Cash receipts during 2020: | |
| Cash sales | P 35,000 |
| Collections on credit sales (after returns and allowances of P4,000) | 446,000 |
| Sale, on July 1, 2020, of equipment costing P6,000 on which depreciation of P1,500 had accumulated | 5,500 |
| Bank loan proceeds, after deducting interest of P700 | 9,300 |
| Rent income (sublease of premises) | 1,500 |
| P497,300 | |
| Cash disbursements during 2020: | |
| Cash purchases |
P 20,000 |
| Payments on accounts payable, after purchase returns and allowances of P3,000 | 315,000 |
| Expenses paid: | |
| Salaries | 92,000 |
| Rent | 18,000 |
| Utilities | 5,000 |
| Supplies | 6,000 |
| Taxes | 8,500 |
| Miscellaneous expenses | 9,600 |
| Equipment purchased on July 1, 2020 | 10,000 |
| Dividends paid | 5,000 |
| P489,100 |
Other information gathered:
- Inventory at December 31, 2020 increased by 35% over that of the preceding yearend.
- Depreciation of furniture and equipment is recorded on a monthly basis at 10% a year.
- Unused supplies at the end of the year, P600.
- Unpaid miscellaneous expenses at December 31, 2020, P3,100.
- Rent received in advance on December 31, 2020, P600.
- Prepaid interest at yearend, P300.
- Balances at December 31, 2020 for accounts with trade debtors and creditors are ascertained to be as follows:
- Accounts receivable (of which 6% are estimated to be bad), P92,000.
- Accounts payable, P84,000
- During the year, P1,900 of customers’ accounts were written off as uncollectible.
Based on the information above, answer the following:
- How much is the credit sales for the year ended December 31, 2020?
- How much is the credit purchases for the year ended December 31, 2020?
- How much is the gross profit for the year ended December 31, 2020?
- How much is the gain on sale of equipment for the year ended December 31, 2020?
- How much is the rent income for the year ended December 31, 2020?
- How much is the total current assets as of December 31, 2020?
- How much is the retained earnings as of December 31, 2020?
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