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Please explain how interest expense changes on the adjusted trial balance and show work out of the answer

Please explain how interest expense changes on the adjusted trial balance and show work out of the answer

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please explain how interest expense changes on the adjusted trial balance and show work out of the answer 

The problem to be resolved: The following trial balance was extracted from the books of Movies To The Max Ltd at December 31, the end of the company's financial year. The company is owned by Samuel Maximo and is in the business of buying and selling movies on tapes. Trial Balance as at July 31, 2021 Trial Balance A/C Name Cash Accounts receivable Alowance for bad debt Merchandise Inventory Store Supplies Prepaid Rent Computer and Equipment Accumikted depreciation -Computer and Equipment Delivery Truck Accumukted depreciation - Delivery Truck Accounts payable Wages payabe Uneamed Sakes revenue Notes Payable, Long Term Samuel Maximo, Capital Samuel Maximo, Withdrawak Saks revene DR CR 750,000 290,500 25,0000 167.050 120,000 510,000 1,200,000 1,900,000 150,000 400,000 150,000 1,000,000 2,500,000 105,000 2,833,580 Sakes discount Saks retums and alowances Cost of goods sold 73,250 52,100 495,000 325,125 Wages Expense Rent Expense Depreciation Expense - Computer and Equipment Deprecistion Experse -Delivery Truck Store Supplies Expense Utlities Expense Bad Debt Expense Interest Expense Total 680,000 65,000 220,000 105,555 7,058,580 7,058,580 The following additional information is available at July 31, 2021: (i) Insurance of $510,000 was paid on April 1, 2021, for six (6) -months to February 2022. (ii) The computer and equipment were purchased on December 1, 2020 and have an estimated useful life of 10 years. This asset is depreciated on the double- declining depreciation method down to a residual value of $100,000. (iii) The company has two deliver trucks and uses the units of production method to compute the depreciation charges. One of the trucks was purchased for $800,000 on August 1, 2018, and is recognized as truck A. The other which is recognized as truck B was purchased for $1,100,000 on October 1, 2020. The expected useful life of both truck is ten (10) years or 120,000 miles. And the residual value on both trucks is $200,000. In the 2018/2019 financial year truck A drove 12,000 miles, 18,000 miles in 2019/2020, and 21,000 miles in 2020/2021. Truck B drove 8,000 miles in 2020/2021. (iv) Wages earned by employees NOT yet paid amounted to 23,050 at July 31, 2021. (v) A physical count of inventory at July 31, 2021 reveals $165,070 worth of inventory on hand. (vi) At July 31, 2021 $105,000 of the previously unearned sales revenue had been earned. (vii) The aging of the Accounts Receivable schedule at July 31, 2021 indicated that the estimated uncollectible on account receivable should be $29.050. REQUIRED: (A-F) a) Prepare the necessary adjusting journal entries on July 31, 2021. [Narrations are not required] b) Prepare Columbus Ltd multiple-step income statement for the year ended July 31, 2021. c) Prepare Columbus Ltd statement of owner's equity for the year ended July 31, 2021. d) Prepare Columbus Ltd classified balance sheet at July 31, 2021. e) Prepare the closing entries ) Prepare the post-closing trial balance
Transcribed Image Text:The problem to be resolved: The following trial balance was extracted from the books of Movies To The Max Ltd at December 31, the end of the company's financial year. The company is owned by Samuel Maximo and is in the business of buying and selling movies on tapes. Trial Balance as at July 31, 2021 Trial Balance A/C Name Cash Accounts receivable Alowance for bad debt Merchandise Inventory Store Supplies Prepaid Rent Computer and Equipment Accumikted depreciation -Computer and Equipment Delivery Truck Accumukted depreciation - Delivery Truck Accounts payable Wages payabe Uneamed Sakes revenue Notes Payable, Long Term Samuel Maximo, Capital Samuel Maximo, Withdrawak Saks revene DR CR 750,000 290,500 25,0000 167.050 120,000 510,000 1,200,000 1,900,000 150,000 400,000 150,000 1,000,000 2,500,000 105,000 2,833,580 Sakes discount Saks retums and alowances Cost of goods sold 73,250 52,100 495,000 325,125 Wages Expense Rent Expense Depreciation Expense - Computer and Equipment Deprecistion Experse -Delivery Truck Store Supplies Expense Utlities Expense Bad Debt Expense Interest Expense Total 680,000 65,000 220,000 105,555 7,058,580 7,058,580 The following additional information is available at July 31, 2021: (i) Insurance of $510,000 was paid on April 1, 2021, for six (6) -months to February 2022. (ii) The computer and equipment were purchased on December 1, 2020 and have an estimated useful life of 10 years. This asset is depreciated on the double- declining depreciation method down to a residual value of $100,000. (iii) The company has two deliver trucks and uses the units of production method to compute the depreciation charges. One of the trucks was purchased for $800,000 on August 1, 2018, and is recognized as truck A. The other which is recognized as truck B was purchased for $1,100,000 on October 1, 2020. The expected useful life of both truck is ten (10) years or 120,000 miles. And the residual value on both trucks is $200,000. In the 2018/2019 financial year truck A drove 12,000 miles, 18,000 miles in 2019/2020, and 21,000 miles in 2020/2021. Truck B drove 8,000 miles in 2020/2021. (iv) Wages earned by employees NOT yet paid amounted to 23,050 at July 31, 2021. (v) A physical count of inventory at July 31, 2021 reveals $165,070 worth of inventory on hand. (vi) At July 31, 2021 $105,000 of the previously unearned sales revenue had been earned. (vii) The aging of the Accounts Receivable schedule at July 31, 2021 indicated that the estimated uncollectible on account receivable should be $29.050. REQUIRED: (A-F) a) Prepare the necessary adjusting journal entries on July 31, 2021. [Narrations are not required] b) Prepare Columbus Ltd multiple-step income statement for the year ended July 31, 2021. c) Prepare Columbus Ltd statement of owner's equity for the year ended July 31, 2021. d) Prepare Columbus Ltd classified balance sheet at July 31, 2021. e) Prepare the closing entries ) Prepare the post-closing trial balance
2. Adjusted Trial Balance - The Max Ltd Adjusted Trial Balance At July 31, 2021 Accounts Title Debit Credit $ 750,000 $ 290,000 Cash Accounts receivable Allownace for bad debt $29,050 Merchandise Inventory Store Supplies $ 165,070 $ 120,000 $ 170,000 Prepaid Rent Computer and Equipment $1,200,000 $ 160,000 Accumulated depreciation - Computer and equipment Delivery Truck Accumulated depreciation - Delivery Truck $1,900,000 $ 315,000 $ 400,000 Acco able Wages payable 23,050 $ 45,000 $1,000,000 Unearned Sales revenue Notes Payabe, Long term Samuel Maximo, Capital $2,500,000 Samuel Maximo, Withdrawals $ 105,000 Sales revenue $2,938,580 Sales discount 73,250 $ 52,100 $ 496,980 $ 348,175 $1,020,000 $ 160,000 $ 165,000 $ 65,000 $ 220,000 Sales returns and allowances Cost of goods sold Wages expense Rent Expence Depreciation expense - Computer and Equipment Depreciation expense -Delivery truck Store Supplies expense Utilities Expenses Bad debt expense $ 4,050 Interest expense $ 106,055 Total $7,410,680 $7,410,680
Transcribed Image Text:2. Adjusted Trial Balance - The Max Ltd Adjusted Trial Balance At July 31, 2021 Accounts Title Debit Credit $ 750,000 $ 290,000 Cash Accounts receivable Allownace for bad debt $29,050 Merchandise Inventory Store Supplies $ 165,070 $ 120,000 $ 170,000 Prepaid Rent Computer and Equipment $1,200,000 $ 160,000 Accumulated depreciation - Computer and equipment Delivery Truck Accumulated depreciation - Delivery Truck $1,900,000 $ 315,000 $ 400,000 Acco able Wages payable 23,050 $ 45,000 $1,000,000 Unearned Sales revenue Notes Payabe, Long term Samuel Maximo, Capital $2,500,000 Samuel Maximo, Withdrawals $ 105,000 Sales revenue $2,938,580 Sales discount 73,250 $ 52,100 $ 496,980 $ 348,175 $1,020,000 $ 160,000 $ 165,000 $ 65,000 $ 220,000 Sales returns and allowances Cost of goods sold Wages expense Rent Expence Depreciation expense - Computer and Equipment Depreciation expense -Delivery truck Store Supplies expense Utilities Expenses Bad debt expense $ 4,050 Interest expense $ 106,055 Total $7,410,680 $7,410,680
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