The adjusted trial balance for AA Construction on December 21 of the current year follows. AA CONSTRUCTION Adjusted Trial Balance December 21 Number Account Title Debit Credit 101 Cash $ 7,500 126 Supplies 30,900 128 Prepaid insurance 8,000 167 Equipment 45,000 168 Accumulated depreciation—Equipment $ 22,500 173 Building 162,000 174 Accumulated depreciation—Building 54,000 183 Land 76,370 201 Accounts payable 16,500 203 Interest payable 3,000 208 Rent payable 3,200 210 Wages payable 2,700 213 Property taxes payable 800 236 Unearned revenue 14,700 251 Long-term notes payable 63,500 307 Common stock 7,500 318 Retained earnings 126,800 319 Dividends 12,000 403 Services revenue 98,000 406 Rent revenue 16,000 409 Interest revenue 5,100 606 Depreciation expense—Building 11,880 612 Depreciation expense—Equipment 6,750 623 Wages expense 40,200 633 Interest expense 3,100 637 Insurance expense 8,900 640 Rent expense 12,400 652 Supplies expense 5,400 683 Property taxes expense 3,900 Totals $ 434,300 $ 434,300 The Retained Earnings account balance was $126,800 on December 21 of the prior year. Required: a. Prepare the income statement for the current year that ended December 21. b. Prepare the statement of retained earnings for the current year that ended December 21. c. Prepare the classified balance sheet on December 21 of the current year. 2. Prepare the necessary closing entries on December 21 of the current year.
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.
The adjusted
| AA CONSTRUCTION | |||
| Adjusted Trial Balance | |||
| December 21 | |||
| Number | Account Title | Debit | Credit |
|---|---|---|---|
| 101 | Cash | $ 7,500 | |
| 126 | Supplies | 30,900 | |
| 128 | Prepaid insurance | 8,000 | |
| 167 | Equipment | 45,000 | |
| 168 | $ 22,500 | ||
| 173 | Building | 162,000 | |
| 174 | Accumulated depreciation—Building | 54,000 | |
| 183 | Land | 76,370 | |
| 201 | Accounts payable | 16,500 | |
| 203 | Interest payable | 3,000 | |
| 208 | Rent payable | 3,200 | |
| 210 | Wages payable | 2,700 | |
| 213 | Property taxes payable | 800 | |
| 236 | Unearned revenue | 14,700 | |
| 251 | Long-term notes payable | 63,500 | |
| 307 | Common stock | 7,500 | |
| 318 | Retained earnings | 126,800 | |
| 319 | Dividends | 12,000 | |
| 403 | Services revenue | 98,000 | |
| 406 | Rent revenue | 16,000 | |
| 409 | Interest revenue | 5,100 | |
| 606 | Depreciation expense—Building | 11,880 | |
| 612 | Depreciation expense—Equipment | 6,750 | |
| 623 | Wages expense | 40,200 | |
| 633 | Interest expense | 3,100 | |
| 637 | Insurance expense | 8,900 | |
| 640 | Rent expense | 12,400 | |
| 652 | Supplies expense | 5,400 | |
| 683 | Property taxes expense | 3,900 | |
| Totals | $ 434,300 | $ 434,300 |
The Retained Earnings account balance was $126,800 on December 21 of the prior year.
Required:
a. Prepare the income statement for the current year that ended December 21.
b. Prepare the statement of retained earnings for the current year that ended December 21.
c. Prepare the classified
2. Prepare the necessary closing entries on December 21 of the current year.
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