Mastery Problem: The Accounting Cycle. Chandler, Inc. Chandler, Inc. is owned by Roscoe Chandler and provides appraisal services to individuals and companies wishing to purchase and sell fine art. Chandler, Inc. began business on January 1, 2017, and is just completing its first year of business. Roscoe asks for your help in completing the accounting cycle for the company by assisting with the closing process.
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.
Mastery Problem: The Accounting Cycle.
Chandler, Inc.
Chandler, Inc. is owned by Roscoe Chandler and provides appraisal services to individuals and companies wishing to purchase and sell fine art. Chandler, Inc. began business on January 1, 2017, and is just completing its first year of business. Roscoe asks for your help in completing the accounting cycle for the company by assisting with the closing process.
Adjusted
Before the closing
| Chandler, Inc. Adjusted Trial Balance December 31, 2017 |
||
| Account Title | Debit Balances | Credit Balances |
| Cash | 93,000 | |
| 29,000 | ||
| Prepaid Insurance | 16,000 | |
| Office Equipment | 60,000 | |
| 40,000 | ||
| Accounts Payable | 6,000 | |
| Salaries Payable | 8,000 | |
| Income Taxes Payable | 4,000 | |
| Common Stock | 2,000 | |
| 25,000 | ||
| Dividends | 5,000 | |
| Fees Earned | 185,600 | |
| Rent Revenue | 92,000 | |
| Interest Revenue | 17,200 | |
| Salaries Expense | 71,000 | |
| Selling Expense | 25,600 | |
| Income Taxes Expense | 15,000 | |
| Insurance Expense | 17,000 | |
| Depreciation Expense | 47,200 | |
| Miscellaneous Expense | 1,000 | |
| 379,800 | 379,800 |
Roscoe's Journal
Roscoe has attempted to journalize the closing entries for Chandler, Inc. on this panel. He's not sure if he's journalized the entries correctly, and asks you to review them. You find that one entry is correct, but the other is incorrect.
Determine which entry is incorrect, and journalize both closing entries for Chandler, Inc. as of Dec. 31.
| Journal | Page 25 | |||
| Date | Description | Post. Ref. | Debit | Credit |
| Dec. 31 | Retained Earnings | 471,600 | ||
| Fees Earned | 185,600 | |||
| Rent Revenue | 92,000 | |||
| Interest Revenue | 17,200 | |||
| Salaries Expense | 71,000 | |||
| Selling Expense | 25,600 | |||
| Income Taxes Expense | 15,000 | |||
| Depreciation Expense | 47,200 | |||
| Insurance Expense | 17,000 | |||
| Miscellaneous Expense | 1,000 | |||
| Dec. 31 | Retained Earnings | 5,000 | ||
| Dividends | 5,000 |
Journal
Roscoe has attempted to journalize the closing entries for Chandler, Inc. on the Roscoe's Journal panel. He's not sure if he's journalized the entries correctly, and asks you to review them. You find that one entry is correct, but the other is incorrect.
Determine which entry is incorrect, and journalize both closing entries for Chandler, Inc. as of Dec. 31. If an amount box does not require an entry, leave it blank.
| Dec. 31 | |||
| Dec. 31 | |||
Post-Closing Trial Balance
The post-closing trial balance shows all the permanent accounts with their updated values after the temporary accounts have been reduced to zero balance for the next accounting cycle. Also, the post-closing trial balance is meant to ensure that debits equal credits post-close.
Roscoe is very happy with your work on the closing entries for Chandler, Inc., and asks if you would prepare a post-closing trial balance for the company. If an amount box does not require an entry, leave it blank.
| Chandler, Inc. Post-Closing Trial Balance December 31, 2017 |
||
| Account Title | Debit Balances | Credit Balances |
| Cash | ||
| Accounts Receivable | ||
| Prepaid Insurance | ||
| Office Equipment | ||
| Accumulated Depreciation-Office Equipment | ||
| Accounts Payable | ||
| Salaries Payable | ||
| Income Taxes Payable | ||
| Common Stock | ||
| Retained Earnings | ||
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