Use the trial balance and additional information to prepare a classified statement of financial position at December 31, 2020.
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.
Bayley Company has the following
|
Account |
Balance |
|
Cash |
$460,000 |
|
|
352,000 |
|
Inventory at the lower of FIFO cost and net realizable value |
451,000 |
|
Trading Investments |
230,000 |
|
Buildings (net of |
740,000 |
|
Equipment (net of accumulated depreciation) |
240,000 |
|
Land held for Future Use |
305,000 |
|
|
89,000 |
|
Notes Receivable (due 2025) |
91,000 |
|
Prepaid Insurance |
16,000 |
|
Accounts Payable |
345,000 |
|
Guaranteed Investment Certificates |
50,000 |
|
Notes Payable (due in 2021) |
235,000 |
|
Bonds Payable at net carrying value (due February 1, 2021) |
83,000 |
|
Rent Payable |
55,000 |
|
Bonds Payable at net carrying value (due December 31, 2028) |
746,000 |
|
Common shares, unlimited number of shares authorized |
400,000 |
|
Contributed surplus |
190,000 |
|
|
See additional Information #5 below |
Additional Information:
- The cash account includes and amount for a bank overdraft of $40,000 which was netted out of the Cash balance. The overdraft relates to a bank account held at a different bank from the account with the cash balance.
- The accumulated depreciation balance for the buildings is $220,000and that the accumulated depreciation balance for the equipment is $275,000.
- The allowance for doubtful accounts has a balance of $24,000.
- The fair value of the trading investments is 240,000 at year end.
- Find the value needed in Retained Earnings to balance the
statement of financial position . - Common shares were issued at an average issue price of $1.60 per share.
- Guaranteed Investment Certificates were purchased by Bayley on November 15, 2020 and mature on January 15, 2021.
Required: Use the trial balance and additional information to prepare a classified statement of financial position at December 31, 2020. List Current Assets in order of liquidity. Use a proper three-line title. Use contra-accounts where possible. Include all disclosures. Show all calcuations.
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