Tan Company sells laptop computers. Inventory is maintained using the perpetual inventory system. All purchases of inventory are on account; accounts payable are paid in the month after purchase. On December 31, 2022, the inventory account had a balance of $52,500 prior to adjustment. A new accounting system was implemented in 2022 and proper accounting for transactions around year-end was not properly controlled. Some events that occurred are as follows. 1.Laptops shipped to a customer on January 2, 2023, which cost $6,000, were included in inventory at December 31, 2022. The sale was recorded in 2023. 2.Laptops costing $13,000 received December 31, 2022, were recorded as received on January 2, 2023. 3.Laptops received in November 2022 costing $4,200 were recorded twice in the inventory account. 4.Laptops shipped to a customer December 28, 2022, FOBshipping point, which cost $9,000, were not received by the customer until January 2023. The laptops were not included in the ending inventory. 5.Laptops on hand on December 31, 2022, costing $6,100 were never recorded in the accounting records because the invoice was not paid until January 2023. 6. A supplier shipped laptops costing $7,500 to the company on December 28, 2022, FOB shipping point. Tan received the shipment on January 3, 2023, so did not include them in inventory. Required: (a) Prepare entries necessary to correct the inventory balance at December 31, 2022. (b) What is the inventory balance after appropriate corrections have been 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.
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III. Tan Company sells laptop computers. Inventory is maintained using the perpetual inventory system. All purchases of inventory are on account; accounts payable are paid in the month after purchase. On December 31, 2022, the inventory account had a balance of $52,500 prior to adjustment. A new accounting system was implemented in 2022 and proper accounting for transactions around year-end was not properly controlled. Some events that occurred are as follows.
1.Laptops shipped to a customer on January 2, 2023, which cost $6,000, were included in inventory at December 31, 2022. The sale was recorded in 2023.
2.Laptops costing $13,000 received December 31, 2022, were recorded as received on January 2, 2023.
3.Laptops received in November 2022 costing $4,200 were recorded twice in the inventory account.
4.Laptops shipped to a customer December 28, 2022, FOBshipping point, which cost $9,000, were not received by the customer until January 2023. The laptops were not included in the ending inventory.
5.Laptops on hand on December 31, 2022, costing $6,100 were never recorded in the accounting records because the invoice was not paid until January 2023.
6. A supplier shipped laptops costing $7,500 to the company on December 28, 2022, FOB shipping point. Tan received the shipment on January 3, 2023, so did not include them in inventory.
Required:
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