Consider each of the transactions below. All of the expenditures were made in cash. The Edison Company spent $18,000 during the year for experimental purposes in connection with the development of a new product. In April, the Marshall Company lost a patent infringement suit and paid $5,000 in legal fees to the plaintiff. In March, the Cleanway Laundromat bought equipment. Cleanway paid $12,000 down and signed a noninterest-bearing note requiring the payment of $21,000 in nine months. The cash price for this equipment was $29,000. On June 1, the Jamsen Corporation installed a sprinkler system throughout the building at a cost of $34,000. The Mayer Company, plaintiff, paid $18,000 in legal fees in November, in connection with a successful infringement suit on its patent. The Johnson Company traded its old equipment for new equipment. The new equipment has a fair value of $11,800. The old equipment had an original cost of $10,400 and a book value of $4,800 at the time of the trade. Johnson also paid cash of $9,200 as part of the trade. The exchange has commercial substance. Required: Prepare journal entries to record each of the above transactions.
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.
Consider each of the transactions below. All of the expenditures were made in cash.
- The Edison Company spent $18,000 during the year for experimental purposes in connection with the development of a new product.
- In April, the Marshall Company lost a patent infringement suit and paid $5,000 in legal fees to the plaintiff.
- In March, the Cleanway Laundromat bought equipment. Cleanway paid $12,000 down and signed a noninterest-bearing note requiring the payment of $21,000 in nine months. The cash price for this equipment was $29,000.
- On June 1, the Jamsen Corporation installed a sprinkler system throughout the building at a cost of $34,000.
- The Mayer Company, plaintiff, paid $18,000 in legal fees in November, in connection with a successful infringement suit on its patent.
- The Johnson Company traded its old equipment for new equipment. The new equipment has a fair value of $11,800. The old equipment had an original cost of $10,400 and a book value of $4,800 at the time of the trade. Johnson also paid cash of $9,200 as part of the trade. The exchange has commercial substance.
Required:
Prepare
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