The following items were selected from among the transactions completed by Sherwood Co. during the current year: Mar. 1 Purchased merchandise on account from Kirkwood Co., $175,000, terms n/30. 31 Issued a 30-day, 6% note for $175,000 to Kirkwood Co., on account. Apr. 30 Paid Kirkwood Co. the amount owed on the note of March 31. Jun. 1 Borrowed $400,000 from Triple Creek Bank, issuing a 45-day, 5% note. Jul. 1 Purchased tools by issuing a $45,000, 60-day note to Poulin Co., which discounted the note at the rate of 7%. 16 Paid Triple Creek Bank the interest due on the note of June 1 and renewed the loan by issuing a new 30-day, 6% note for $400,000. (Journalize both the debit and credit to the notes payable account.) Aug. 15 Paid Triple Creek Bank the amount due on the note of July 16. 30 Paid Poulin Co. the amount due on the note of July 1. Dec. 1 Purchased equipment from Greenwood Co. for $260,000, paying $40,000 cash and issuing a series of ten 9% notes for $22,000 each, coming due at 30-day intervals. 22 Settled a product liability lawsuit with a customer for $50,000, payable in January. Accrued the loss in a litigation claims payable account. 31 Paid the amount due to Greenwood Co. on the first note in the series issued on December 1. Required: 1. Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year. 2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year (refer to the Chart of Accounts for exact wording of account titles): a. Product warranty cost, $80,000. b. Interest on the nine remaining notes owed to Greenwood Co. Assume a 360-day year
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.
| Mar. | 1 | Purchased merchandise on account from Kirkwood Co., $175,000, terms n/30. |
| 31 | Issued a 30-day, 6% note for $175,000 to Kirkwood Co., on account. | |
| Apr. | 30 | Paid Kirkwood Co. the amount owed on the note of March 31. |
| Jun. | 1 | Borrowed $400,000 from Triple Creek Bank, issuing a 45-day, 5% note. |
| Jul. | 1 | Purchased tools by issuing a $45,000, 60-day note to Poulin Co., which discounted the note at the rate of 7%. |
| 16 | Paid Triple Creek Bank the interest due on the note of June 1 and renewed the loan by issuing a new 30-day, 6% note for $400,000. (Journalize both the debit and credit to the notes payable account.) | |
| Aug. | 15 | Paid Triple Creek Bank the amount due on the note of July 16. |
| 30 | Paid Poulin Co. the amount due on the note of July 1. | |
| Dec. | 1 | Purchased equipment from Greenwood Co. for $260,000, paying $40,000 cash and issuing a series of ten 9% notes for $22,000 each, coming due at 30-day intervals. |
| 22 | Settled a product liability lawsuit with a customer for $50,000, payable in January. Accrued the loss in a litigation claims payable account. | |
| 31 | Paid the amount due to Greenwood Co. on the first note in the series issued on December 1. |
| Required: | |||||
| 1. | Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year. | ||||
| 2. | Journalize the
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