Problem 4 - Prepare Closing Entries and a Post-Closing Trial Balance Required: Below is the Adjusted Trial Balance for Orange Corporation for the year ended December 31, 2020. Prepare the closing entries and the post-closing trial balance for December 31, 2020. Orange Corporation Adjusted Trial Balance December 31, 2020 Account Debit Credit Cash 42,550 Accounts Receivable 36,470 Supplies 3,550 Prepaid Rent 4,200 Land 50,000 Equipment 131,500 Accum. Deprec. - Equip. 63,500 Accounts Payable 32,600 Salaries Payable 3,500 Unearned Revenue 6,370 Common Stock 75,000 Retained Earnings 42,000 Dividends 7,300 Service Revenue 336,000 Rent Expense 48,000 Salaries Expense 182,300 Advertising Expense 2,500 Depreciation Expense 12,500 Supplies Expense 6,200 Income Tax Expense 23,500 Miscellaneous Expense 8,400 Total 558,970 558,970 General Journal Date Account Debit Credit 12/31/20 12/31/20 Orange Corporation Post-Closing Trial Balance December 31, 2020 Account Debit Credit
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.
| Problem 4 - Prepare Closing Entries and a Post-Closing |
| Required: | |||||||||
| Below is the Adjusted Trial Balance for Orange Corporation for the year ended December 31, 2020. | |||||||||
| Prepare the closing entries and the post-closing trial balance for December 31, 2020. |
| Orange Corporation | |||||||
| Adjusted Trial Balance | |||||||
| December 31, 2020 | |||||||
| Account | Debit | Credit | |||||
| Cash | 42,550 | ||||||
| Accounts Receivable | 36,470 | ||||||
| Supplies | 3,550 | ||||||
| Prepaid Rent | 4,200 | ||||||
| Land | 50,000 | ||||||
| Equipment | 131,500 | ||||||
| Accum. Deprec. - Equip. | 63,500 | ||||||
| Accounts Payable | 32,600 | ||||||
| Salaries Payable | 3,500 | ||||||
| Unearned Revenue | 6,370 | ||||||
| Common Stock | 75,000 | ||||||
| 42,000 | |||||||
| Dividends | 7,300 | ||||||
| Service Revenue | 336,000 | ||||||
| Rent Expense | 48,000 | ||||||
| Salaries Expense | 182,300 | ||||||
| Advertising Expense | 2,500 | ||||||
| 12,500 | |||||||
| Supplies Expense | 6,200 | ||||||
| Income Tax Expense | 23,500 | ||||||
| Miscellaneous Expense | 8,400 | ||||||
| Total | 558,970 | 558,970 | |||||
| General Journal | |||||||
| Date | Account | Debit | Credit | ||||
| 12/31/20 | |||||||
| 12/31/20 | |||||||
| Orange Corporation | |||||||
| Post-Closing Trial Balance | |||||||
| December 31, 2020 | |||||||
| Account | Debit | Credit | |||||
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