In this session, we have a 6-part comprehensive problem. Download the Session 6 Comprehensive Problem Templates below to complete the 6 required parts of the problem. You will need your Bergevin and MacQueen book for reference. Rancho Cucamonga Inc. began business on January 1, 2020. The firm earned $100 from sales in its first year of business. Rancho Cucamonga collected $90 of revenue earned in cash during 2020 and reported a $10 account receivable on its 2020 balance sheet. The firm paid $70 cash for operating expenses in 2020 and reported a $5 account payable for unpaid operating expenses on its 2020 balance sheet. Income tax laws only recognize cash collected from sales and cash paid for expenses as taxable items in the year collected or paid. Rancho Cucamonga also reported a $10 fine, paid in cash, to the federal government for unfair business practices. Generally accepted accounting principles allow firms to report government fines as a business expense, but income tax laws do not allow firms to deduct fines paid when determining taxable income. Finally, the federal income tax rate was 20% in 2020, and Rancho Cucamonga was not subject to any state income taxes. With the information provided, complete the following Part 1 Sales revenue Operating expenses Operating income Expense for unfair practices Income before taxation Part 2 Taxable revenue ($100 – 90) Deductible expenses ($75 – 5) Taxable income Income taxes payable (.20) Part 3 Date Accounts Debit Credit 12/31/2020 Part 4 Sales revenue Operating expenses Operating income Expense for unfair practices Income before taxation Income tax expense Net income Part 5 Assets Liabilities Accounts receivable Accounts payable Income tax receivable Income tax payable Part 6 Income tax expense Income before taxation Effective income tax rate
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.
Assignment 6.1: Session 6 Comprehensive Problem (Chapter 8)
Instructions
In this session, we have a 6-part comprehensive problem. Download the Session 6 Comprehensive Problem Templates below to complete the 6 required parts of the problem. You will need your Bergevin and MacQueen book for reference.
Rancho Cucamonga Inc. began business on January 1, 2020. The firm earned $100 from sales in its first year of business. Rancho Cucamonga collected $90 of revenue earned in cash during 2020 and reported a $10 account receivable on its 2020 balance sheet. The firm paid $70 cash for operating expenses in 2020 and reported a $5 account payable for unpaid operating expenses on its 2020 balance sheet. Income tax laws only recognize cash collected from sales and cash paid for expenses as taxable items in the year collected or paid.
Rancho Cucamonga also reported a $10 fine, paid in cash, to the federal government for unfair business practices. Generally accepted accounting principles allow firms to report government fines as a business expense, but income tax laws do not allow firms to deduct fines paid when determining taxable income.
Finally, the federal income tax rate was 20% in 2020, and Rancho Cucamonga was not subject to any state income taxes.
With the information provided, complete the following
Part 1
| Sales revenue | |
| Operating expenses | |
| Operating income | |
| Expense for unfair practices | |
| Income before |
Part 2
| Taxable revenue ($100 – 90) | |
| Deductible expenses ($75 – 5) | |
| Taxable income | |
| Income taxes payable (.20) |
Part 3
| Date | Accounts | Debit | Credit |
| 12/31/2020 | |||
Part 4
| Sales revenue | |
| Operating expenses | |
| Operating income | |
| Expense for unfair practices | |
| Income before taxation | |
| Income tax expense | |
| Net income |
Part 5
| Assets | Liabilities | |||
| Accounts receivable | Accounts payable | |||
| Income tax receivable | Income tax payable |
Part 6
| Income tax expense | |
| Income before taxation | |
| Effective income tax rate |
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