Exercise 9-02 Adama Company incurred the following costs.Indicate to which account Adama would debit each of the costs. 1. Sales tax on factory machinery purchased $5,000 Select the account to be debited BuildingPrepaid InsuranceLandEquipmentLand Improvements 2. Painting of and lettering on truck immediately upon purchase 700 Select the account to be debited LandBuildingEquipmentLand ImprovementsPrepaid Insurance 3. Installation and testing of factory machinery 2,000 Select the account to be debited BuildingLand ImprovementsPrepaid InsuranceLandEquipment 4. Real estate broker’s commission on land purchased 3,500 Select the account to be debited Land ImprovementsPrepaid InsuranceEquipmentBuildingLand 5. Insurance premium paid for first year’s insurance on new truck 880 Select the account to be debited Prepaid InsuranceEquipmentLand ImprovementsBuildingLand 6. Cost of landscaping on property purchased 7,200 Select the account to be debited BuildingLandLand ImprovementsEquipmentPrepaid Insurance 7. Cost of paving parking lot for new building constructed 17,900 Select the account to be debited BuildingPrepaid InsuranceLandEquipmentLand Improvements 8. Cost of clearing, draining, and filling land 13,300 Select the account to be debited LandBuildingEquipmentLand ImprovementsPrepaid Insurance 9. Architect’s fees on self-constructed building 10,000 Select the account to be debited Land ImprovementsPrepaid InsuranceBuildingEquipmentLand
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.
Exercise 9-02
Indicate to which account Adama would debit each of the costs.
| 1. |
Sales tax on factory machinery purchased
|
$5,000 | Select the account to be debited
BuildingPrepaid InsuranceLandEquipmentLand Improvements
|
|||
| 2. |
Painting of and lettering on truck immediately upon purchase
|
700 | Select the account to be debited
LandBuildingEquipmentLand ImprovementsPrepaid Insurance
|
|||
| 3. |
Installation and testing of factory machinery
|
2,000 | Select the account to be debited
BuildingLand ImprovementsPrepaid InsuranceLandEquipment
|
|||
| 4. |
Real estate broker’s commission on land purchased
|
3,500 | Select the account to be debited
Land ImprovementsPrepaid InsuranceEquipmentBuildingLand
|
|||
| 5. |
Insurance premium paid for first year’s insurance on new truck
|
880 | Select the account to be debited
Prepaid InsuranceEquipmentLand ImprovementsBuildingLand
|
|||
| 6. |
Cost of landscaping on property purchased
|
7,200 | Select the account to be debited
BuildingLandLand ImprovementsEquipmentPrepaid Insurance
|
|||
| 7. |
Cost of paving parking lot for new building constructed
|
17,900 | Select the account to be debited
BuildingPrepaid InsuranceLandEquipmentLand Improvements
|
|||
| 8. |
Cost of clearing, draining, and filling land
|
13,300 | Select the account to be debited
LandBuildingEquipmentLand ImprovementsPrepaid Insurance
|
|||
| 9. |
Architect’s fees on self-constructed building
|
10,000 | Select the account to be debited
Land ImprovementsPrepaid InsuranceBuildingEquipmentLand
|
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