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nsaction cash in ement of bility tion ash nt of le adju mies of asinis si obuloni atom 5249qxa mollusiomast by the regular accounting staff.36 15820-61 10000 15226 s 01 tibstols bus innos YEAR-END AT OVERNIGHT AUTO SERVICE To illustrate the various types of adjusting entries, we will again use our example involving Overnight Auto Service. Chapter 3 concluded with Overnight's trial balance dated 28 February 2013 (the end of the company's second month of operations). We will now skip ahead to 31 December 2013-the end of Overnight's first year of operations. This will enable us to illustrate the preparation of annual financial statements, rather than statements that cover only a single month. 975 mod vor 1925. a sus hingang, camminent bon Most companies make adjusting entries every month. We will assume that Overnight has been following this approach throughout 2013. The company's unadjusted trial balance dated 31 December 2013, appears in Exhibit 4-2. It is referred to as an unadjusted trial balance because Overnight last made adjusting entries on 30 November; therefore, it is still necessary to make adjusting entries for the month of December. tiniamsi esilqque or to obem ei olemines bsau noad sved of bomuzan su "anizzion" 16 Cash..... Accounts receivable Shop supplies. Unexpired insurance. Notes payable. Accounts payable Income taxes payable.. Unearned rent revenue. controller or by a professional accountant, rather than In many businesses, the Land Building. Accumulated depreciation: building Tools and equipment Accumulated depreciation: tools and equipment Share capital. Retained earnings .92090x Dividends b. die...om Repair service revenue. Advertising expense Wages expense Supplies expense OVERNIGHT AUTO SERVICE Trial Balance 31 December 2013 Depreciation expense: building. Depreciation expense: tools and equipment. I Itilition $ 18,592 6,500 1,800 4,500 52,000 36,000 mon esilqque Ini bozn assd 12,000 $ 1,500 2,000 4,000 2012 v gaitzuibs 2,690 bsn li (S) bás asdass 1,56020 ed.o. betsmites esilqquz to 9,000 s 80,000 2 เวioๆ หวกล้า 0 og soms 14,000sivis2 s sbiv ad29ving voilo 31.250 171,250 3,900 etaulli of 56,800 viennengmos 6,900 11ho is sm yo ni slidw goloidov1,500 mo of se wallot 26. 10u0906 15222,000 badan zew $ чел it mo 21 Exh UNA BAL

nsaction cash in ement of bility tion ash nt of le adju mies of asinis si obuloni atom 5249qxa mollusiomast by the regular accounting staff.36 15820-61 10000 15226 s 01 tibstols bus innos YEAR-END AT OVERNIGHT AUTO SERVICE To illustrate the various types of adjusting entries, we will again use our example involving Overnight Auto Service. Chapter 3 concluded with Overnight's trial balance dated 28 February 2013 (the end of the company's second month of operations). We will now skip ahead to 31 December 2013-the end of Overnight's first year of operations. This will enable us to illustrate the preparation of annual financial statements, rather than statements that cover only a single month. 975 mod vor 1925. a sus hingang, camminent bon Most companies make adjusting entries every month. We will assume that Overnight has been following this approach throughout 2013. The company's unadjusted trial balance dated 31 December 2013, appears in Exhibit 4-2. It is referred to as an unadjusted trial balance because Overnight last made adjusting entries on 30 November; therefore, it is still necessary to make adjusting entries for the month of December. tiniamsi esilqque or to obem ei olemines bsau noad sved of bomuzan su "anizzion" 16 Cash..... Accounts receivable Shop supplies. Unexpired insurance. Notes payable. Accounts payable Income taxes payable.. Unearned rent revenue. controller or by a professional accountant, rather than In many businesses, the Land Building. Accumulated depreciation: building Tools and equipment Accumulated depreciation: tools and equipment Share capital. Retained earnings .92090x Dividends b. die...om Repair service revenue. Advertising expense Wages expense Supplies expense OVERNIGHT AUTO SERVICE Trial Balance 31 December 2013 Depreciation expense: building. Depreciation expense: tools and equipment. I Itilition $ 18,592 6,500 1,800 4,500 52,000 36,000 mon esilqque Ini bozn assd 12,000 $ 1,500 2,000 4,000 2012 v gaitzuibs 2,690 bsn li (S) bás asdass 1,56020 ed.o. betsmites esilqquz to 9,000 s 80,000 2 เวioๆ หวกล้า 0 og soms 14,000sivis2 s sbiv ad29ving voilo 31.250 171,250 3,900 etaulli of 56,800 viennengmos 6,900 11ho is sm yo ni slidw goloidov1,500 mo of se wallot 26. 10u0906 15222,000 badan zew $ чел it mo 21 Exh UNA BAL

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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This pages is about explaining a type of adjusting entries. In the second paragraph, last sentances, "Thus,...November." Why is in October and November? How about the December? As the trial balacne shown in other image is in Decemenr 31, so the 1560 liability for income taxes payable represaesnts only the income taxes accrued from October to December. But not to Novemebr. Yes? As this three months liability haven't paid yet!

on act of fou 12 10 920514 Don Justi bubrous] nsaction cash in ement of bility tion ash ent of le justing present pond- come et or controller or by a professional accountant, rather than In many businesses, the 1922- ) 1 ns of tibstols bus inuosos of sinine di obuloni atnom YEAR-END AT OVERNIGHT AUTO SERVICE 90sqxs noilsissiqsb To illustrate the various types of adjusting entries, we will again use our example involving Overnight Auto Service. Chapter 3 concluded with Overnight's trial balance dated 28 February 2013 (the end of the company's second month of operations). We will now skip ahead to 31 December 2013-the end of Overnight's first year of operations. This will enable us to illustrate the preparation of annual financial statements, rather than statements that cover only usqs bingst a single month.qxs om 21 316 Timur fl Most companies make adjusting entries every month. We will assume that Overnight has been following this approach throughout 2013. The company's unadjusted trial balance dated 31 December 2013, appears in Exhibit 4-2. It is referred to as an unadjusted trial balance because Overnight last made adjusting entries on 30 November; therefore, it is still necessary to make adjusting entries for the month of December. nismo esilqque odi to obem ei sismiles GID bozu gosd sved of bomueen sus "anizzim" 916 adj by the regular accounting staff. yone Cash.o another opiraos esilqque Accounts receivable. obom ar Shop supplies... Unexpired insurance... Land ... Building... Accumulated depreciation: building Tools and equipment Accumulated depreciation: tools and equipment Sm Notes payable.... 291aqu2 Accounts payable. ve as of :29200100 Income taxes payable.s. 2eilgqu2 god? or to somsled sri 29 Unearned rent revenue. Share capital... -ORetained earnings OVERNIGHT AUTO SERVICE Trial Balance 31 December 2013 Dividends.. od: 2.A.orab. 1 Repair service revenue. Utilities expense.. Insurance expense Income taxes expense... 000.81 -THROU Advertising expense. 01 0:812 Wages expense .. -mahlas Supplies expense. 26 90 SONST nibus constant viilidsil svi s lipst Depreciation expense: building. Depreciation expense: tools and equipment. nt qu'boa 1.18 is brid Smium 26 29 LE is basd noad.o!! In 2sipilog. $ 18,592 6,500 1,800 4,500 52,000 36,000 92 smst esilqque ni bozd edmebed 12,000 2,000 4,000 wiesvise yuns gaitzujbs 2,690 boti (S) bas 19dmsos $ 1,500 1,56020 .01. betsmites asilqque to 9,000 s 80,000 onl 1201. 1. 29iil09 9 org st soms 14,000V192 sbiv ho sdt sm Teigmo 29tique voilo mi 3,900 56,800 6,900¹ Yoilog esloidev 1,500 o ogs 20 quopos 15222,000 batidsb 26w cons 171,250 Ieteulli OT of 19,400 13,500 22,608 U $272,000 $272,000 In the next few pages we illustrate several transactions, as well as the related adjust- ing entries. Both are shown in the format of general journal entries. To help distinguish between transactions and adjusting entries, transactions are printed in blue and adjusting entries ni od to noino di non consled sin endgimovoni stor sans sonini in red. Trea $ لعها it mo er Exh UNA BAL
Transcribed Image Text:on act of fou 12 10 920514 Don Justi bubrous] nsaction cash in ement of bility tion ash ent of le justing present pond- come et or controller or by a professional accountant, rather than In many businesses, the 1922- ) 1 ns of tibstols bus inuosos of sinine di obuloni atnom YEAR-END AT OVERNIGHT AUTO SERVICE 90sqxs noilsissiqsb To illustrate the various types of adjusting entries, we will again use our example involving Overnight Auto Service. Chapter 3 concluded with Overnight's trial balance dated 28 February 2013 (the end of the company's second month of operations). We will now skip ahead to 31 December 2013-the end of Overnight's first year of operations. This will enable us to illustrate the preparation of annual financial statements, rather than statements that cover only usqs bingst a single month.qxs om 21 316 Timur fl Most companies make adjusting entries every month. We will assume that Overnight has been following this approach throughout 2013. The company's unadjusted trial balance dated 31 December 2013, appears in Exhibit 4-2. It is referred to as an unadjusted trial balance because Overnight last made adjusting entries on 30 November; therefore, it is still necessary to make adjusting entries for the month of December. nismo esilqque odi to obem ei sismiles GID bozu gosd sved of bomueen sus "anizzim" 916 adj by the regular accounting staff. yone Cash.o another opiraos esilqque Accounts receivable. obom ar Shop supplies... Unexpired insurance... Land ... Building... Accumulated depreciation: building Tools and equipment Accumulated depreciation: tools and equipment Sm Notes payable.... 291aqu2 Accounts payable. ve as of :29200100 Income taxes payable.s. 2eilgqu2 god? or to somsled sri 29 Unearned rent revenue. Share capital... -ORetained earnings OVERNIGHT AUTO SERVICE Trial Balance 31 December 2013 Dividends.. od: 2.A.orab. 1 Repair service revenue. Utilities expense.. Insurance expense Income taxes expense... 000.81 -THROU Advertising expense. 01 0:812 Wages expense .. -mahlas Supplies expense. 26 90 SONST nibus constant viilidsil svi s lipst Depreciation expense: building. Depreciation expense: tools and equipment. nt qu'boa 1.18 is brid Smium 26 29 LE is basd noad.o!! In 2sipilog. $ 18,592 6,500 1,800 4,500 52,000 36,000 92 smst esilqque ni bozd edmebed 12,000 2,000 4,000 wiesvise yuns gaitzujbs 2,690 boti (S) bas 19dmsos $ 1,500 1,56020 .01. betsmites asilqque to 9,000 s 80,000 onl 1201. 1. 29iil09 9 org st soms 14,000V192 sbiv ho sdt sm Teigmo 29tique voilo mi 3,900 56,800 6,900¹ Yoilog esloidev 1,500 o ogs 20 quopos 15222,000 batidsb 26w cons 171,250 Ieteulli OT of 19,400 13,500 22,608 U $272,000 $272,000 In the next few pages we illustrate several transactions, as well as the related adjust- ing entries. Both are shown in the format of general journal entries. To help distinguish between transactions and adjusting entries, transactions are printed in blue and adjusting entries ni od to noino di non consled sin endgimovoni stor sans sonini in red. Trea $ لعها it mo er Exh UNA BAL
4,000 60 30 000,02 L belei ncluding 4,090 he customer ervices are ed until all 50 the current king entry. propriate has been ered into ttle Ser- able on tod et been yment usting h: pense ry 31. d ACCRUING INCOME TAXES EXPENSE: tofsymomat 21 THE FINAL ADJUSTING ENTRY As a corporation earns taxable income, it incurs income taxes expense, and also a liability to governmental tax authorities. In each country, the tax remittance requirements are not the same. For Overnight, our illustration assumes several requirements as follows: (a) the tax liability is paid in four installments called estimated quarterly payments; (b) the first three payments normally are made on 15 April, 15 June, and 15 September; and (c) the final payment is not due until 15 January of the following year. 6 3120 Overic pns enstakit Ta In its unadjusted trial balance (Exhibit 4-2 on page 147), Overnight shows income taxes expense of $22,608. This is the income taxes expense recognized from 20 January 2013, (the date Overnight opened for business) through 30 November 2013. Income taxes accrued DINER through 30 September have already been paid. Thus, the $1,560 liability for income taxes payable represents only the income taxes accrued in October and November. Sm onbemos 91 Tortin ng Sms 25 congueurot J The amount of income taxes expense accrued for any given month is only an estimate. The Jor pilidaily in to 25x1 DURISION tomosfill PALLET actual amount of income taxes cannot be determined until the company prepares its annual Smil Hipoti vege 5510.19220 9440100 income tax return. In our illustrations and assignment materials, we estimate income taxes insamos en su 2misombanshze and are expense at 40 percent of taxable income. We also assume that taxable income is equal to Dorisq torq hisensake be also assume that . profit before income taxes, a subtotal often shown in an income statement. This subtotal is anomearlos19-189 S 900660 1090 5280 INDO996 9106Y61 25X61 Я эmoonl al revenue less all expenses other than income taxes. A "sldsvisos bouts & smoon!" [-A tididxal ni awodz 28.2201 xsi-erotsd sr) to Jawoms sri jenison 19aflo total Anoth INTERNATIONAL CASE IN POINT Corporate income tax rates vary around the world. A recent survey shows that rates mor range from 9 percent in Montenegro to 55 percent in the United Arab Emirates. The average tax rate is 25 percent worldwide and 40 percent in the United States.* In addition to corporate income taxes, some countries also (1) withhold taxes on dividends, interest, and royalties, (2) charge value-added taxes at specified production and distribution points, and (3) impose border taxes such as customs and import duties. W ni-alitaned xs/ omoon in won soil *KPMG Corporate Tax Rate Survey (January 2009)ber 25xil dem SAT 320k Busin ses purchase many assets that have a very lo profi S In 2013, Overnight earned profit before income taxes of $66,570 (see the income state- ment in Exhibit 5-2, page 198, in Chapter 5). Therefore, income taxes expense for the entire year is estimated at $26,628 ($66,570 × 40 percent). Given that income taxes expense recognized through 30 November amounts to $22,608 (see the unadjusted trial balance in Exhibit 4-2), an additional $4,020 in income taxes expense must have accrued during Bb Veond nithe expense is: bersbrony Hssio sintogard blozS9TD eboog/smirorh dittoisuier coise los bossbong ghims bersigmon 4,020 lavitodida ecember ($26,628 - $22,608). The adjusting entry to record this esd 225plaud oni moqain OSTERSEN OG HU 31 Dec. Income Taxes Expense TROLEU225302102, 20 Income Taxes Payable GLE 2 19maizubiyet 4,020 isitAbstamitas Sd Vino DIE Adjusting entry to record income taxes accrued in December. ovo nishoo viestitalomallaugu ziraidh bhs ignored if the dollar amo .. This entry increases the balance in the Income Taxes Expense account to the $26,628 year en amount required for the sid XBJ Shqxs XXS 5Vinkysh as to visos flat a time of any i mi year ended 31 December 2013. It also increases the liability for income taxes payable to $5,580 ($1,560 + $4,020). The transaction to record the payment al mio bist and a Sabqmod wolpin Ub Shri¹x Bin (ashunos olhos fil hovswol bonsq instio oli ni zal oil or gainaloi 6 This assumption enables us to enables us to accrue income taxes in December in the same manner as in other months. Otherwise, income taxes for this month would be recorded as a mid-month transaction, rather than in an end-of-month adjusting entry. The adjusting entry for income taxes is an example of an accrued, but unpaid, Apizare: di expense. H₂ Do th niso tile 220l xa OTH T-A tidid: SMOOTIO ТИЗМЕТАТ no Bu w Adjusting ent income taxes
Transcribed Image Text:4,000 60 30 000,02 L belei ncluding 4,090 he customer ervices are ed until all 50 the current king entry. propriate has been ered into ttle Ser- able on tod et been yment usting h: pense ry 31. d ACCRUING INCOME TAXES EXPENSE: tofsymomat 21 THE FINAL ADJUSTING ENTRY As a corporation earns taxable income, it incurs income taxes expense, and also a liability to governmental tax authorities. In each country, the tax remittance requirements are not the same. For Overnight, our illustration assumes several requirements as follows: (a) the tax liability is paid in four installments called estimated quarterly payments; (b) the first three payments normally are made on 15 April, 15 June, and 15 September; and (c) the final payment is not due until 15 January of the following year. 6 3120 Overic pns enstakit Ta In its unadjusted trial balance (Exhibit 4-2 on page 147), Overnight shows income taxes expense of $22,608. This is the income taxes expense recognized from 20 January 2013, (the date Overnight opened for business) through 30 November 2013. Income taxes accrued DINER through 30 September have already been paid. Thus, the $1,560 liability for income taxes payable represents only the income taxes accrued in October and November. Sm onbemos 91 Tortin ng Sms 25 congueurot J The amount of income taxes expense accrued for any given month is only an estimate. The Jor pilidaily in to 25x1 DURISION tomosfill PALLET actual amount of income taxes cannot be determined until the company prepares its annual Smil Hipoti vege 5510.19220 9440100 income tax return. In our illustrations and assignment materials, we estimate income taxes insamos en su 2misombanshze and are expense at 40 percent of taxable income. We also assume that taxable income is equal to Dorisq torq hisensake be also assume that . profit before income taxes, a subtotal often shown in an income statement. This subtotal is anomearlos19-189 S 900660 1090 5280 INDO996 9106Y61 25X61 Я эmoonl al revenue less all expenses other than income taxes. A "sldsvisos bouts & smoon!" [-A tididxal ni awodz 28.2201 xsi-erotsd sr) to Jawoms sri jenison 19aflo total Anoth INTERNATIONAL CASE IN POINT Corporate income tax rates vary around the world. A recent survey shows that rates mor range from 9 percent in Montenegro to 55 percent in the United Arab Emirates. The average tax rate is 25 percent worldwide and 40 percent in the United States.* In addition to corporate income taxes, some countries also (1) withhold taxes on dividends, interest, and royalties, (2) charge value-added taxes at specified production and distribution points, and (3) impose border taxes such as customs and import duties. W ni-alitaned xs/ omoon in won soil *KPMG Corporate Tax Rate Survey (January 2009)ber 25xil dem SAT 320k Busin ses purchase many assets that have a very lo profi S In 2013, Overnight earned profit before income taxes of $66,570 (see the income state- ment in Exhibit 5-2, page 198, in Chapter 5). Therefore, income taxes expense for the entire year is estimated at $26,628 ($66,570 × 40 percent). Given that income taxes expense recognized through 30 November amounts to $22,608 (see the unadjusted trial balance in Exhibit 4-2), an additional $4,020 in income taxes expense must have accrued during Bb Veond nithe expense is: bersbrony Hssio sintogard blozS9TD eboog/smirorh dittoisuier coise los bossbong ghims bersigmon 4,020 lavitodida ecember ($26,628 - $22,608). The adjusting entry to record this esd 225plaud oni moqain OSTERSEN OG HU 31 Dec. Income Taxes Expense TROLEU225302102, 20 Income Taxes Payable GLE 2 19maizubiyet 4,020 isitAbstamitas Sd Vino DIE Adjusting entry to record income taxes accrued in December. ovo nishoo viestitalomallaugu ziraidh bhs ignored if the dollar amo .. This entry increases the balance in the Income Taxes Expense account to the $26,628 year en amount required for the sid XBJ Shqxs XXS 5Vinkysh as to visos flat a time of any i mi year ended 31 December 2013. It also increases the liability for income taxes payable to $5,580 ($1,560 + $4,020). The transaction to record the payment al mio bist and a Sabqmod wolpin Ub Shri¹x Bin (ashunos olhos fil hovswol bonsq instio oli ni zal oil or gainaloi 6 This assumption enables us to enables us to accrue income taxes in December in the same manner as in other months. Otherwise, income taxes for this month would be recorded as a mid-month transaction, rather than in an end-of-month adjusting entry. The adjusting entry for income taxes is an example of an accrued, but unpaid, Apizare: di expense. H₂ Do th niso tile 220l xa OTH T-A tidid: SMOOTIO ТИЗМЕТАТ no Bu w Adjusting ent income taxes
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