On December 31, 2025, Martinez Company prepared an income statement and balance sheet, but failed to take into account three adjusting entries. The balance sheet showed total assets $156,000, total liabilities $72,800, and stockholders' equity $83,200. The incorrect income statement showed net income of $72,800. The data for the three adjusting entries were: 1 Salaries and wages amounting to $10,400 for the last 2 days in December were not paid and not recorded. The next payroll will be in January. Rent payments of $8.320 was received for two months in advance on December 1. The entire amount was credited to Unearned Rent Revenue when paid. Depreciation expense for 2025 is $9,360. 2 3. Complete the following table to correct the financial statement amounts shown (indicate deductions with parentheses). (Enter negative amounts using either a negative sign preceding the number eg. -45 or parentheses eg. (45)) Total Liabilities Stockholders' Equity Item Incorrect balances Effects of Salaries and Wages Rent Revenue Depreciation Correct balances Net Income $72,800 Total Assets $156,000 $72,800 $83.200
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.
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