The following trial balance was extracted from the books of Movies To The Max Ltd at December 31, the end of the company’s financial year. The company is owned by Samuel Maximo and is in the business of buying and selling movies on tapes. Trial Balance as at July 31, 2021 Trial Balance Account Name DR CR Cash 750,000 Accounts receivable 290,500 Allowance for bad debt 25,000 Merchandise inventory 167,050 Store Supplies 120,000 Prepaid rent 510,000 Computer and Equipment 1,200,000 Accumulated depreciations – Computer and Equipment Delivery Truck 1,900,000 Accumulated depreciation Delivery Truck 150,000 Accounts payable 400,000 Wages payable Unearned sales revenue 150,000 Notes payable, long term 1,000,000 Samuel Maximo, Capital 2,500,000 Samuel Maximo, Withdrawals 105,000 Sales revenue 2,833,580 Sales discount 73,250 Sales returns and allowances 52,100 Cost of goods sold 495,000 Wages expenses 325,125 Rent expenses 680,000 Depreciation Expenses – Computer and Equipment Depreciation Expenses – Delivery Truck Store Supplies Expense 65,000 Utilities expenses Bad debt expenses Interest expense 105,555 Total 7,058,580 7,058,580 The following additional information is available at July 31, 2021: Insurance of $510,000 was paid on April 1, 2021, for six (6) -months to February 2022. The computer and equipment were purchased on December 1, 2020 and have an estimated useful life of 10 years. This asset is depreciated on the double-declining depreciation method down to a residual value of $100,000. The company has two deliver trucks and uses the units of production method to compute the depreciation charges. One of the trucks was purchased for $800,000 on August 1, 2018, and is recognized as truck A. The other which is recognized as truck B was purchased for $1,100,000 on October 1, 2020. The expected useful life of both truck is ten (10) years or 120,000 miles. And the residual value on both trucks is $200,000. In the 2018/2019 financial year truck A drove 12,000 miles, 18,000 miles in 2019/2020, and 21,000 miles in 2020/2021. Truck B drove 8,000 miles in 2020/2021. Wages earned by employees NOT yet paid amounted to 23,050 at July 31, 2021. A physical count of inventory at July 31, 2021 reveals $165,070 worth of inventory on hand. At July 31, 2021 $105,000 of the previously unearned sales revenue had been earned. The aging of the Accounts Receivable schedule at July 31, 2021 indicated that the estimated uncollectible on account receivable should be $29,050. REQUIRED: (A-F) Prepare Columbus Ltd classified balance sheet at July 31, 2021. Prepare the closing entries Prepare the post-closing trial balance
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 following
Trial Balance as at July 31, 2021
|
|
Trial Balance |
|
|
Account Name |
DR |
CR |
|
Cash |
750,000 |
|
|
Accounts receivable |
290,500 |
|
|
Allowance for |
|
25,000 |
|
Merchandise inventory |
167,050 |
|
|
Store Supplies |
120,000 |
|
|
Prepaid rent |
510,000 |
|
|
Computer and Equipment |
1,200,000 |
|
|
Accumulated depreciations – Computer and Equipment |
|
|
|
Delivery Truck |
1,900,000 |
|
|
Accumulated depreciation Delivery Truck |
|
150,000 |
|
Accounts payable |
|
400,000 |
|
Wages payable |
|
|
|
Unearned sales revenue |
|
150,000 |
|
Notes payable, long term |
|
1,000,000 |
|
Samuel Maximo, Capital |
|
2,500,000 |
|
Samuel Maximo, Withdrawals |
105,000 |
|
|
Sales revenue |
|
2,833,580 |
|
Sales discount |
73,250 |
|
|
Sales returns and allowances |
52,100 |
|
|
Cost of goods sold |
495,000 |
|
|
Wages expenses |
325,125 |
|
|
Rent expenses |
680,000 |
|
|
Depreciation Expenses – Computer and Equipment |
|
|
|
Depreciation Expenses – Delivery Truck |
|
|
|
Store Supplies Expense |
65,000 |
|
|
Utilities expenses |
|
|
|
Bad debt expenses |
|
|
|
Interest expense |
105,555 |
|
|
Total |
7,058,580 |
7,058,580 |
The following additional information is available at July 31, 2021:
- Insurance of $510,000 was paid on April 1, 2021, for six (6) -months to February 2022.
- The computer and equipment were purchased on December 1, 2020 and have an estimated useful life of 10 years. This asset is
depreciated on the double-declining depreciation method down to a residual value of $100,000. - The company has two deliver trucks and uses the
units of production method to compute the depreciation charges. One of the trucks was purchased for $800,000 on August 1, 2018, and is recognized as truck A. The other which is recognized as truck B was purchased for $1,100,000 on October 1, 2020. The expected useful life of both truck is ten (10) years or 120,000 miles. And the residual value on both trucks is $200,000. In the 2018/2019 financial year truck A drove 12,000 miles, 18,000 miles in 2019/2020, and 21,000 miles in 2020/2021. Truck B drove 8,000 miles in 2020/2021. - Wages earned by employees NOT yet paid amounted to 23,050 at July 31, 2021.
- A physical count of inventory at July 31, 2021 reveals $165,070 worth of inventory on hand.
- At July 31, 2021 $105,000 of the previously unearned sales revenue had been earned.
- The aging of the Accounts Receivable schedule at July 31, 2021 indicated that the estimated uncollectible on account receivable should be $29,050.
REQUIRED: (A-F)
- Prepare Columbus Ltd classified balance sheet at July 31, 2021.
- Prepare the closing entries
- Prepare the post-closing trial balance
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