The following information is available December 31, 2020: (i) Store Supplies on hand on December 31, 2020, amounted to $255,500. (ii) Insurance of $2,775,000 was paid on January 1, 2020, for the 15-months to March 31, 2021 (iii) Prepaid rent expired December 31, 2020, amounts to $850,000 (iv) 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 $50,000. (v) The machinery cost includes two coffee drink machines purchased for $900,000 each by the company on January 1, 2014. The double-declining balance method of depreciation is used to compute the machinery’s depreciation charges and their expected useful life is 10 years or 100,000 drinks. In 2014, 5,000 drinks were sold, 6,500 in 2015, 7,800 in 2016, 9,000 in 2017, 11,500 in 2018, 12,800 in 2019 15,900 sold in 2020. The residual value on both machines is $96,637 each. On September 1, 2020, the company sold one of the coffee drinks machines for $480,000 cash. (vi) Salaries earned by employees and not yet paid amounted to $180,000 on Dec 31, 2020. (vii) Accrued interest expense as of December 31, 2020, $98,000. (viii) On Dec 31, 2020, $695,000 of the previously unearned sales revenue had been earned (ix) The aging of the Accounts Receivable schedule on Dec 31, 2020, indicated that the Allowance for Bad Debts should be $371,000 (x) A physical count of inventory was done on December 31, 2020, after making all the other adjustments and this revealed that there was $2,400,000 worth of inventory on hand at this point. Other data: (xi) The business is expected to make principal payments totaling $400,000 towards the loan during the fiscal year to December 31,2021. Account Names Trial Balance Dr Cr Cash 560,000 Accounts receivable 3,710,000 Allowance for bad debt 290,000 Merchandise Inventory 2,580,000 Store Supplies 1,300,000 Prepaid Insurance 2,775,000 Prepaid Rent 1,000,000 Furniture 2,650,000 Accumulated Depreciation-Furniture 2,080,000 Machinery 1,800,000 Accumulated Depreciation-Machinery 1,328,141 Accounts Payable 630,000 Salary Payable Interest Payable Unearned Sales Revenue 800,000 Note Payable, Long Term 2,500,000 Patty Patterson, Capital 5,200,000 Patty Patterson, Withdrawals 280,000 Sales Revenue 22,726,859 Sales Discount 1,200,000 Sales Returns and Allowances 800,000 Cost of Goods Sold 8,100,000 Salaries Expense 7,270,000 Insurance Expense Utilities Expense 580,000 Rent Expense 950,000 Depreciation Expense – Furniture Depreciation Expense – Machinery Store Supplies-Expense Gain on Disposal of Machinery Bad-Debt Expense Interest Expense 35,555,000 35,555,000 Required: a) Prepare the Adjusted Trial balance for the period ending December 31, 2020.
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.
The following information is available December 31, 2020:
(i) Store Supplies on hand on December 31, 2020, amounted to $255,500.
(ii) Insurance of $2,775,000 was paid on January 1, 2020, for the 15-months to March 31,
2021
(iii) Prepaid rent expired December 31, 2020, amounts to $850,000
(iv) The furniture and fixtures have an estimated useful life of 10 years and is being
(v) The machinery cost includes two coffee drink machines purchased for $900,000 each by
the company on January 1, 2014. The double-declining balance method of depreciation is used to compute the machinery’s depreciation charges and their expected useful life is 10 years or 100,000 drinks.
In 2014, 5,000 drinks were sold,
6,500 in 2015,
7,800 in 2016,
9,000 in 2017,
11,500 in 2018,
12,800 in 2019
15,900 sold in 2020.
The residual value on both machines is $96,637 each. On September 1, 2020, the company sold one of the coffee drinks machines for $480,000 cash.
(vi) Salaries earned by employees and not yet paid amounted to $180,000 on Dec 31, 2020.
(vii) Accrued interest expense as of December 31, 2020, $98,000.
(viii) On Dec 31, 2020, $695,000 of the previously unearned sales revenue had been earned
(ix) The aging of the
(x) A physical count of inventory was done on December 31, 2020, after making all the other adjustments and this revealed that there was $2,400,000 worth of inventory on hand at this point.
Other data:
(xi) The business is expected to make principal payments totaling $400,000 towards the
loan during the fiscal year to December 31,2021.
|
Account Names |
|
|
|
|
Dr |
Cr |
|
Cash |
560,000 |
|
|
Accounts receivable |
3,710,000 |
|
|
Allowance for bad debt |
|
290,000 |
|
Merchandise Inventory |
2,580,000 |
|
|
Store Supplies |
1,300,000 |
|
|
Prepaid Insurance |
2,775,000 |
|
|
Prepaid Rent |
1,000,000 |
|
|
Furniture |
2,650,000 |
|
|
|
|
2,080,000 |
|
Machinery |
1,800,000 |
|
|
Accumulated Depreciation-Machinery |
|
1,328,141 |
|
Accounts Payable |
|
630,000 |
|
Salary Payable |
|
|
|
Interest Payable |
|
|
|
Unearned Sales Revenue |
|
800,000 |
|
Note Payable, Long Term |
|
2,500,000 |
|
Patty Patterson, Capital |
|
5,200,000 |
|
Patty Patterson, Withdrawals |
280,000 |
|
|
Sales Revenue |
|
22,726,859 |
|
Sales Discount |
1,200,000 |
|
|
Sales Returns and Allowances |
800,000 |
|
|
Cost of Goods Sold |
8,100,000 |
|
|
Salaries Expense |
7,270,000 |
|
|
Insurance Expense |
|
|
|
Utilities Expense |
580,000 |
|
|
Rent Expense |
950,000 |
|
|
Depreciation Expense – Furniture |
|
|
|
Depreciation Expense – Machinery |
|
|
|
Store Supplies-Expense |
|
|
|
Gain on Disposal of Machinery |
|
|
|
Bad-Debt Expense |
|
|
|
Interest Expense |
|
|
|
|
35,555,000 |
35,555,000 |
Required:
a) Prepare the Adjusted Trial balance for the period ending December 31, 2020.
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