Learning Case #4 Chapter 4 The following is an unadjusted trial balance (before any adjustments have been made) for Garcia, Inc. at December 31 of the current year: Account Titles Debit Credit Cash 42,000 Accounts Receivable 11,600 Supplies 900 Prepaid Insurance 800 Service Vehicles 19,000 Accumulated Depreciation 9,200 Other Assets 8,300 Accounts Payable 3,000 Wages Payable Income Taxes Payable Note Payable (3 years) 17,000 Common Stock (5,000 shares outstanding) 400 Additional Paid-in-Capital 19,000 Retained Earnings 6,000 Service Revenue 61,360 Remaining Expenses 33,360 Income Tax Expense Totals 115,960 115,960 Additional information not yet recorded: a) The supplies count at year-end reflected $300 remaining supplies on hand (unused). b) Insurance expired during the year: $800. c) Depreciation expense for the year: $3,700. d) Wages earned by employees not yet paid at year-end: $640. e) Income tax expense incurred but unpaid at year-end: $5,540. Required 1. Record the adjusting entries listed above, post to general ledger accounts, and prepare an adjusted trial balance. 2. Compare your balances with those on the given income statement, retained earnings statement, and balance sheet for December 31. 3. Record closing entries for the year, post to general ledger accounts, and prepare a post-closing trial balance.
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.
Learning Case #4
Chapter 4
The following is an unadjusted
Garcia, Inc. at December 31 of the current year:
Account Titles Debit Credit
Cash 42,000
Accounts Receivable 11,600
Supplies 900
Prepaid Insurance 800
Service Vehicles 19,000
Accumulated
Other Assets 8,300
Accounts Payable 3,000
Wages Payable
Income Taxes Payable
Note Payable (3 years) 17,000
Common Stock (5,000 shares outstanding) 400
Additional Paid-in-Capital 19,000
Retained Earnings 6,000
Service Revenue 61,360
Remaining Expenses 33,360
Income Tax Expense
Totals 115,960 115,960
Additional information not yet recorded:
a) The supplies count at year-end reflected $300 remaining supplies on hand (unused).
b) Insurance expired during the year: $800.
c) Depreciation expense for the year: $3,700.
d) Wages earned by employees not yet paid at year-end: $640.
e) Income tax expense incurred but unpaid at year-end: $5,540.
Required
1. Record the
adjusted trial balance.
2. Compare your balances with those on the given income statement, retained earnings
statement, and balance sheet for December 31.
3. Record closing entries for the year, post to general ledger accounts, and prepare a post-closing
trial balance.
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