Queen Enterprises is a furniture wholesaler. Queen hired a new accounting clerk on January 1 of the current year. The new clerk does not understand accrual accounting and recorded the transac-tions below based on when cash receipts and disbursements changed hands rather than when the transaction occurred. Queen uses a perpetual inventory system, and its accounting policy calls forinventory purchases to be recorded net of any discounts offered.Jan. 7 Paid Hardwoods Forever Inc. $4,900 for furniture that it received on December 20.(This purchase was recorded as a debit to Inventory and a credit to Accounts Payableon December 20 of last year, but the accounting clerk ignores that fact.)Dec. 23 Received furniture from Koos Hoffwan Co. for $10,000; terms 2/10, n/30.Dec. 26 Sold furniture to Beige Chipmunk Inc. for $15,000; terms 1/10, n/30. The cost of thefurniture to Queen was $12,250.Instructionsa. As a result of the accounting clerk’s errors, compute the amount by which the followingaccounts are overstated or understated:1. Accounts Receivable2. Inventory3. Accounts Payable4. Sales5. Cost of Goods Soldb. Compute the amount by which net income is overstated or understated.c. Prepare a single journal entry to correct the errors that the accounting clerk has made. (Assumethat Queen has yet to close its books for the current year.)d. Assume that Queen has already closed its books for the current year. Make a single journalentry to correct the errors that the accounting clerk has made.e. Assume that the ending inventory balance is correctly stated based on adjustments resultingfrom a physical inventory count. (Cost of Goods Sold was debited or credited based on theinventory adjustment.) Assume that Queen has already closed its books for the current year,and make a single journal entry to correct the errors that the accounting clerk has made.
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.
Queen Enterprises is a furniture wholesaler. Queen hired a new accounting clerk on January 1 of
the current year. The new clerk does not understand accrual accounting and recorded the transac-
tions below based on when cash receipts and disbursements changed hands rather than when the
transaction occurred. Queen uses a perpetual inventory system, and its accounting policy calls for
inventory purchases to be recorded net of any discounts offered.
Jan. 7 Paid Hardwoods Forever Inc. $4,900 for furniture that it received on December 20.
(This purchase was recorded as a debit to Inventory and a credit to Accounts Payable
on December 20 of last year, but the accounting clerk ignores that fact.)
Dec. 23 Received furniture from Koos Hoffwan Co. for $10,000; terms 2/10, n/30.
Dec. 26 Sold furniture to Beige Chipmunk Inc. for $15,000; terms 1/10, n/30. The cost of the
furniture to Queen was $12,250.
Instructions
a. As a result of the accounting clerk’s errors, compute the amount by which the following
accounts are overstated or understated:
1. Accounts Receivable
2. Inventory
3. Accounts Payable
4. Sales
5. Cost of Goods Sold
b. Compute the amount by which net income is overstated or understated.
c. Prepare a single
that Queen has yet to close its books for the current year.)
d. Assume that Queen has already closed its books for the current year. Make a single journal
entry to correct the errors that the accounting clerk has made.
e. Assume that the ending inventory balance is correctly stated based on adjustments resulting
from a physical inventory count. (Cost of Goods Sold was debited or credited based on the
inventory adjustment.) Assume that Queen has already closed its books for the current year,
and make a single journal entry to correct the errors that the accounting clerk has made.
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