Prepare year-end adjusting journal entries for M&R Company as of December 31 for each of the above separate cases.
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.
Use the following information for the Exercises below. (Algo)
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[The following information applies to the questions displayed below.]
- M&R Company provided $2,500 in services to customers in December, which are not yet recorded. Those customers are expected to pay the company in January following the company’s year-end.
- Wage expenses of $1,500 have been incurred but are not paid as of December 31.
- M&R Company has a $5,500 bank loan and has incurred (but not recorded) 8% interest expense of $440 for the year ended December 31. The company will pay the $440 interest in cash on January 2 following the company’s year-end.
- M&R Company hired a firm that provided lawn services during December for $550. M&R will pay for December lawn services on January 15 following the company’s year-end.
- M&R Company has earned $250 in interest revenue from investments for the year ended December 31. The interest revenue will be received on January 15 following the company’s year-end.
- Salary expenses of $950 have been earned by supervisors but not paid as of December 31.
Exercise 3-11 (Algo) Preparing adjusting entries —accrued revenues and expenses LO P3, P4
Prepare year-end adjusting
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