Part 1 - Adjusted Trial Balance
Barb has found the following adjusting entries that need to be made to the Unadjusted Trial Balance. Prepare the Adjusting Journal Entries, and enter them onto the Adjusting Entries column of the Adjusted Trial Balance worksheet. Denote the entry number of each adjustment in the entry # column. Note: Some items won't require an adjusting entry. Read each item carefully.
1. Business insurance was purchased in November for $12,000, which covers a 12 month period. An entry needs to be made between prepaid and insurance expense. This entry has been done for you and should be used as an example of how the rest of the entries should be used as an example of how the rest of entries should be completed.
2. Depreciation needs to be calculated for all of the fixed-asset accounts.
- Computer equipment, computer software, furniture and fixtures will be deprecated using the straight-line method over 60 months.
- Machinery will be deprecated over 84 months using the straight-line method of accounting.
3. An entry was made incorrectly recording the Note Payable interest and principal payments to the Other Accrued Liability account. The entry should have been made to Interest Expense and the Notes Payable accounts. The loan has a monthly payment of $1001.61. The shop has paid $2,439 in interest and $5,565 in principle over the past eight months.
A. The note was used to purchase a customer list. The asset will have a life of 10 years, and it should be amortized evenly over the 10-year period. You'll need to record the amortization.
B. The loan has a monthly payment of $1,001.61. The short-term portion of the loan (the next 12 months of payments) needs to be reclassed from account 400-Note Payable to account 335-Short-Term Portion of Notes Payable.
C. As stated above, the original interest expense of $2,439 was incorrectly recorded in the Other Accrued Liabilities account number 320 for the eight-month period. You'll need to make an adjusting journal entry to correct this. You'll need to make an adjusting journal entry to correct this. You'll need to reclassify the error to the error to the interest expense account.
D. The principal amount of $5,565 was also incorrectly recorded in Other Accrued Liabilities account number 320. You'll need to make an adjusting entry, moving this from Accrued Other and reducing the Long-Term Payable account.
4. Several late payables were received but not recorded. These payables were for clothing and accessories discounted after the season and will be sold next year. The total late payable amount is $6,998.
5. Inventory is valued correctly at the lower of cost or market.
6. Since it's the shop's first year, it could be hard to estimate what the balance in the allowance for doubtful accounts should be. But based on the Bernard' s New York store and the similarities of both, Mrs. Bernard estimated the allowance should be 5 percent of Accounts Receivable.
7. Mr. and Mrs. Bernard collect their salary thoughout the year. They're paid one week in arrears Their gross payroll for a week is $3,942, and the employer portion of tax associated with the accrual is 15 percent. You'll need to make an adjusting entry to record the one week of salary and tax expense.
8. Rent is $3,000 per month and is prepaid on the first day of the month.
9. Utilities this time of year are low and run $275 a month. Services are billed for the previous month at the beginning of the next month. For example, June's utility invoice would be sent at the beginning of July. You'll need to adjust for this.
10. The shop's CPA has advised the Bernards that their estimated tax liability for the year will be $51,924. They've made payments through the end of May of $45,434. The remaining amount will need to be accrued.
Total the adjusting entries to be sure they zero out. Your next step will be to combine the Unadjusted Trial Balances and the Adjusting Entries to calculate the Adjusted Trial Balance.
Next, divide the accounts into either Net income or Balance Sheet accounts and enter into the appropriate columns. Hint: The net balance of both the Income and Balance Sheets accounts will be $158,977.
Attachment:- Assignment File.rar