The adjusted trial balance of Ayayai Wholesale Inc. contained the following accounts at December 31, the company's year end: AYAYAI WHOLESALE INC. Adjusted Trial Balance December 31, 2024 Cash Accounts receivable Prepaid insurance Estimated inventory returns Inventory Supplies Land Buildings Accumulated depreciation-buildings Equipment Accumulated depreciation-equipment Accounts payable Deferred revenue Refund liability Income tax payable Bank loan payable Common shares Retained earnings Sales Cost of goods sold Administrative expenses Selling expenses Interest expense Interest income Income tax expense Debit $11,700 18,500 2,700 3,500 80,180 6,000 127,200 218,000 95,500 812,800 88,800 39,200 12,100 17,700 $1,533,880 Credit $93,900 33,600 61,900 9.900 3,760 3,700 97,600 55,000 63,620 1,108,300 2,600 $1,533,880
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.
1. Calculate the profit margin and gross profit margin.
2. The vice-president of marketing and director of human resources have proposed that the company change its compensation of the sales force to a commission basis rather than paying a fixed salary. Given the extra incentive, they expect sales to increase by 15%. They estimate that gross profit will increase by $27,000, operating expenses by $13,500, and income tax expense by $2,700. Non-operating expense is not expected to change. Calculate the expected new gross profit and net income amounts.
3. Calculate the revised gross profit margin and profit margin.
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