Identify the inventory system used by the business. How can you tell? ii) Prepare the necessary adjusting journal entries on June 30, 2011. iii) Prepare Trask’s multiple-step Income Statement Statement of Owner’s Equity for the year ended June 30, 201 1and a Classified Balance Sheet, in report form at, as at that date?
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.
Question 3
The following
fiscal year. The company is owned by Conrad Fuller and is in the business of buying and selling sundry household
items.
Trask Corporation
Trial Balance as at June 30, 2011
Dr $ Cr $
Cash 170,000
Accounts Receivable 142,000
Allowance for
Merchandise Inventory 192,000
Store Supplies 83,000
Prepaid Insurance 54,000
Furniture & Fixtures 800,000
Accumulated
Computer Equipment 450,000
Accumulated Depreciation: Computer Equipment
Accounts Payable 267,000
Wages Payable
Interest Payable
nearned Sales Revenue 89,000
Notes Payable, Long-Term 350,000
Conrad Fuller, Capital 754,000
Conrad Fuller, Withdrawals 165,000
Sales Revenue Earned 985,000
Sales Discount 5,000
Sales Returns & Allowances 12,000
Cost of Goods Sold 390,000
Wages Expense 171,000
Insurance Expense
Utilities Expense 84,000
Depreciation Expense – Furniture & Fixtures
Depreciation Expense – Equipment
Store Supplies Expense
Bad-Debt Expense
Interest Expense 20,000
Total 2,738,000 2,738,000
The following additional information is available at June 30, 2011:
a) Store supplies on hand at June 30, 2011 amounted to $33,000
b) Insurance of $54,000 was paid on June 1, 2011 for the 3-months to August 31, 2011.
c) The furniture and fixtures has an estimated useful life of 8 years and is being depreciated on the
straight-line method down to a residual value of $80,000.
d) The computer equipment was acquired on December 1, 2010 and is being depreciated over 5 years on the
double-declining method of depreciation, down to a residue of $50,000.
e) Wages earned by employees not yet paid amounted to $12,000 at June 30, 2011.
- 4 -
f) Accrued interest expense, $3,500
g) A physical count of inventory at June 30, 2011, reveals $188,000 worth of inventory on hand.
h) At June 30, 2011, $47,000 of the previously unearned sales revenue had been earned.
i) The aging of the Accounts Receivable schedule at June 30th, 2011 indicated that the estimated
uncollectible on account receivable is $14,500.
Other data:
j) $87,000 of the notes payable is due for payment on March 31, 2012.
Required:
i) Identify the inventory system used by the business. How can you tell?
ii) Prepare the necessary
iii) Prepare Trask’s multiple-step Income Statement Statement of Owner’s Equity for the year ended June 30, 201
1and a Classified Balance Sheet, in report form at, as at that date?
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