The following additional information is available at December 31, 2018: (i) Insurance of $450,000 was paid on May 1, 2018 for the 10-months to February 2019. (ii) The furniture and fixtures have an estimated useful life of 10 years and is being depreciated on the straight-line method down to a residual value of $100,000. (ii) The computer equipment was acquired on March 1, 2018 and is being depreciated over 10 years on the double-declining method of depreciation, down to a residue of $60,000. (iv) Wages earned by employees NOT yet paid amounted to 15,000 at December 31, 2018. (v) A physical count of inventory at December 31, reveals $180,000 worth of inventory on hand. (vi) At December 31, $140,000 of the previously unearned sales revenue had been earned. (vii) The aging of the Accounts Receivable schedule at December 31 indicated that the estimated uncollectible on account receivable should be $45,000. REQUIRED: a) Prepare the necessary adjusting journal entries on December 31. [Narrations are not required) b) Prepare Columbus Ltd multiple-step income statement for the year ended December 31, 2018. c) Prepare Columbus Ltd statement of owner's equity for the year ended December 31, 2018. d) Prepare Columbus Ltd classified balance sheet at December 31, 2018. e) Prepare the closing entries f) Prepare the post-closing trial balance
The following additional information is available at December 31, 2018: (i) Insurance of $450,000 was paid on May 1, 2018 for the 10-months to February 2019. (ii) The furniture and fixtures have an estimated useful life of 10 years and is being depreciated on the straight-line method down to a residual value of $100,000. (ii) The computer equipment was acquired on March 1, 2018 and is being depreciated over 10 years on the double-declining method of depreciation, down to a residue of $60,000. (iv) Wages earned by employees NOT yet paid amounted to 15,000 at December 31, 2018. (v) A physical count of inventory at December 31, reveals $180,000 worth of inventory on hand. (vi) At December 31, $140,000 of the previously unearned sales revenue had been earned. (vii) The aging of the Accounts Receivable schedule at December 31 indicated that the estimated uncollectible on account receivable should be $45,000. REQUIRED: a) Prepare the necessary adjusting journal entries on December 31. [Narrations are not required) b) Prepare Columbus Ltd multiple-step income statement for the year ended December 31, 2018. c) Prepare Columbus Ltd statement of owner's equity for the year ended December 31, 2018. d) Prepare Columbus Ltd classified balance sheet at December 31, 2018. e) Prepare the closing entries f) Prepare the post-closing trial balance
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:The following additional information is available at December 31, 2018:
(i)
Insurance of $450,000 was paid on May 1, 2018 for the 10-months to February 2019.
(ii)
The furniture and fixtures have an estimated useful life of 10 years and is being depreciated
on the straight-line method down to a residual value of $100,000.
(ii)
The computer equipment was acquired on March 1, 2018 and is being depreciated over 10
years on the double-declining method of depreciation, down to a residue of $60,000.
(iv)
Wages earned by employees NOT yet paid amounted to 15,000 at December 31, 2018.
(v)
A physical count of inventory at December 31, reveals $180,000 worth of inventory on hand.
(vi)
At December 31, $140,000 of the previously unearned sales revenue had been earned.
(vii)
The aging of the Accounts Receivable schedule at December 31 indicated that the estimated
uncollectible on account receivable should be $45,000.
REQUIRED:
a)
Prepare the necessary adjusting journal entries on December 31. [Narrations are not required}
b)
Prepare Columbus Ltd multiple-step income statement for the year ended December 31, 2018.
c)
Prepare Columbus Ltd statement of owner's equity for the year ended December 31, 2018.
d)
Prepare Columbus Ltd classified balance sheet at December 31, 2018.
e)
Prepare the closing entries
f)
Prepare the post-closing trial balance
Transcribed Image Text:The following trial balance was extracted from the books of Columbus Ltd at December 31, the end of
the company's financial year. The company is owned by John Columbus and is in the business of buying
and farming supplies.
Trial Balance as at December 31, 2018
Trial Balance
A/C Name
Cash
Accounts receivable
Allowance for bad debt
Merchandise Inventory
Store Supplies
Prepaid Insurance
Furniture and Fixtures
Accumulated depreciation-Fumiture and Fixtures
Computer Equipment
Accumulated depreciation Computer Equipm ert
Accounts payable
Wages payable
DR
CR
1,000,000
450,000
15,000
186,000
120,000
450,000
1,000,000
360,000
600,000
320,000
Unearned Sales revenue
150,000
Notes Payable, Long Tem
John C olumbus, Capital
900,000
2,200,000
John C olumbus, Withdrawals
95,000
Sales reveie
1,761,000
Sales discount
120,000
Sales returms and allowances
Cost of goods sold
Wages Expense
Insurance Expense
Depreciation Expense - Furmiture and Fixtures
Depreciation Expense -Computer Equipm ert
Store Supplies Expense
Utilities Expense
Bad Debt Expense
Interest Expense
95,000
650,000
450,000
180,000
40,000
180,000
90,000
Total
5,706,000
5,706,000
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