6th Edition

ISBN: 9781265554927

Author: PHILLIPS

Publisher: MCG

Concept explainers

The Effect Of Prepaid Taxes On Assets And Liabilities

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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

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Trial Balance and Final Accounts

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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 repor…

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Textbook Question

Chapter 4, Problem 2PA

Analyzing and Recording Adjusting Journal Entries

Brokeback Towing Company is at the end of its accounting year, December 31, 2018. The following data that must be considered were developed from the company’s records and related documents:

a. On July 1, 2018, a two-year insurance premium on equipment in the amount of $600 was paid and debited in full to Prepaid Insurance on that date. Coverage began on July 1.
b. At the end of 2018, the unadjusted balance in the Supplies account was $1,000. A physical count of supplies on December 31, 2018, indicated supplies costing $300 were still on hand.
c. On December 31, 2018, YY’s Garage completed repairs on one of Brokeback’s trucks at a cost of $800. The amount is not yet recorded. It will be paid during January 2019.
d. On December 31, 2018, the company completed a contract for an out-of-state company for $7,950 payable by the customer within 30 days. No cash has been collected and no journal entry has been made for this transaction.
e. On July 1, 2018, the company purchased a new hauling van. Depreciation for July–December 2018, estimated to total $2,750, has not been recorded.
f. As of December 31, the company owes interest of $500 on a bank loan taken out on October 1, 2018. The interest will be paid when the loan is repaid on September 30, 2019. No interest has been recorded yet.
g. Assume the income after the preceding adjustments but before income taxes was $30,000. The company’s federal income tax rate is 30%. Compute and record income tax expense.

Required:

1. Give the adjusting journal entry required for each item at December 31, 2018.
2. If adjustments were not made each period, the financial results could be materially misstated. Determine the amount by which Brokeback’s net income would have been understated, or overstated, had the adjustments in requirement 1 not been made.

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Chapter 4, Problem 1PA

Chapter 4, Problem 3PA

Students have asked these similar questions

Prepare the adjusting journal entries as of Dec 31, 2019 for the following information gathered from the ledger of Flag Company : a.) Unexpired of the Prepaid Insurance account balance of P 42,500 was P 24,500. b.) Accrued Interest on Notes issued P 1,270. c.) Equipment acquired on March 31, 2019 at P 120,000, has a scrap value of P4,000 with estimated life of 10 years. d) Unrecorded unpaid taxes P 18,500. e.) Unpaid salaries P22,500. £.) Interest received and credited to Unearned Interest Income account was P 14,000 of which only P 12,000 was eamed. g.) Office supplies has a balance of P 8,000, Consumed as of Dec 31, 2019 was P 6,800. h.) Unearned Rent Income account has a balance of P 24,000 of which P 20,000 was rent earned. i.) Office Supplies balance was P5,600 of which P1,600 was consumed. Account Title Debit Credit a.) b.) e.) (P) e.) f.) g.) h.) i)

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Chapter 4 Solutions

FUNDAMENTALS OF FINANCIAL ACCOUNTING LL

Ch. 4 - Prob. 1Q Ch. 4 - Explain the relationships between adjustments and...Ch. 4 - Prob. 3Q Ch. 4 - Prob. 4Q Ch. 4 - What is a contra-asset? Give an example of one.Ch. 4 - Explain the differences between depreciation...Ch. 4 - What is an adjusted trial balance? What is its...Ch. 4 - On December 31, a company makes a 59,000 payment...Ch. 4 - Using the information in question 8, determine the...Ch. 4 - Using the information in question 8, prepare the...

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