Adjusting Entries Sarah Company’s trial balance on December 31 (the end of its annual accounting period), included the following account balances before adjustments: DEBIT CREDIT Notes Receivable $10,000 - Insurance Expense 3,000 - Delivery Equipment 14,000 - Building 60,000 - Unearned Rent - $ 4,320 Notes Payable - 7200 Office Supplies Expenses 1,000 - Reviewing the company’s recorded transactions and accounting records, you find the following data pertaining to the December 31 adjustments:1. On July 2, the company had accepted a $10,000, 9-month, 10% (annual rate) note receivable from a customer. The interest is to be collected when the note is collected. 2. On August 2, the company had paid $3,000 for a 2-year insurance policy.3. The building was acquired 10 years ago and is being depreciated using the straight-line method over a 25-year life. It has an estimated residual value of of $8,000. 4. The delivery equipment was purchased on April 2. It is to be depreciated using the straight-line method over a 10-year life, with an estimated residual value of $2,000. 5. On September 1, the company had received 2 years’ rent in advance ($4,320) for a portion of a building it is renting to Victoria Company.6. On December 1, the company had issued a $7,200, 3-month, 12% (annual rate) note payable to a supplier. The interest is to be paid when the note is paid.7. On January 2, the company purchased $1,000 of office supplies. A physical count on December 31 revealed that there are $400 of office supplies still on hand. No supplies were on hand at the beginning of the year. Required:Prepare the adjusting entries that are necessary to bring Sarah’s accounts up to date on December 31. Each journal entry explanation should summarize your calculations.
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.
| DEBIT | CREDIT | |
| Notes Receivable | $10,000 | - |
| Insurance Expense | 3,000 | - |
| Delivery Equipment | 14,000 | - |
| Building | 60,000 | - |
| Unearned Rent | - | $ 4,320 |
| Notes Payable | - | 7200 |
| Office Supplies Expenses | 1,000 | - |
Reviewing the company’s recorded transactions and accounting records, you find the following data pertaining to the December 31 adjustments:
1. On July 2, the company had accepted a $10,000, 9-month, 10% (annual rate) note receivable from a customer. The interest is to be collected when the note is collected.
2. On August 2, the company had paid $3,000 for a 2-year insurance policy.
3. The building was acquired 10 years ago and is being depreciated using the straight-line method over a 25-year life. It has an estimated residual value of of $8,000.
4. The delivery equipment was purchased on April 2. It is to be depreciated using the straight-line method over a 10-year life, with an estimated residual value of $2,000.
5. On September 1, the company had received 2 years’ rent in advance ($4,320) for a portion of a building it is renting to Victoria Company.
6. On December 1, the company had issued a $7,200, 3-month, 12% (annual rate) note payable to a supplier. The interest is to be paid when the note is paid.
7. On January 2, the company purchased $1,000 of office supplies. A physical count on December 31 revealed that there are $400 of office supplies still on hand. No supplies were on hand at the beginning of the year.
Required:
Prepare the adjusting entries that are necessary to bring Sarah’s accounts up to date on December 31. Each
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
