Part III. Calculate and Prepare Adjusting Entries (P4-5B) A review of the ledger of Greenberg Corporation at its year end, October 31, 2018, produces the following unadjusted data for the preparation of annual adjusting entries: 1. Prepaid Advertising, October 31, 2018, unadjusted balance, $8,400: On February 1, 2018, the company signed and prepaid $8,400 for a 12-month advertising contract for advertisements to run in a trade magazine that publishes monthly, with the first advertisement starting March 1. 2. Unearned Revenue, October 31, 2018, unadjusted balance, $135,000: The company began subleasing office space in its new building on September 1, 2018. At October 31, the company had five one-year contracts for rental space, signed September 1 at a monthly rent of $4,500. All five tenants paid six months' rent in advance on September 1 for the 12-month rental. 3. Bank Loan Payable, October 31 unadjusted balance, $90,000: This represents a one-year, 8% bank loan signed on April 1, 2018. Interest is payable at maturity. 4. Vehicles, October 31, 2018, unadjusted balance, $39,000: The company owns a vehicle, purchased for $39,000 on April 1, 2017. The vehicle has a five-year useful life and uses straight-line depreciation. Instructions (a) How much advertising expires per month? Prepare a calculation to show why the unadjusted balance in the Prepaid Advertising account is $8,400 at October 31. How much should the adjusted balance in the Prepaid Advertising account be at October 31? (b) Prepare a calculation to show why the unadjusted balance in the Unearned Revenue account is $135,000 at October 31. How much should the adjusted balance in the Unearned Revenue account be at October 31? (c) How much is interest on the bank loan each month? How much interest is owed, if any, on October 31, 2018? How much interest will be paid on April 1, 2019, when the bank loan matures? (d) How much is annual depreciation expense? Calculate the unadjusted balance in the Accumulated Depreciation account as at October 31, 2018. How much should the adjusted balance in the Accumulated Depreciation account be at October 31, 2018? (e) Prepare the adjusting journal entries required for each of the above four items at October 31, 2018.
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.
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