Below is the trial balance which was extracted from the books of the Ready Hospital Supplies on June 30, the end of the company’s financial year. You are required to collaborate and analyse the problem at hand then apply the accrual basis of accounting in the preparation of the company’s financial statements. Ready Hospital Supplies Trial Balance as at June 30, 2020 Dr $ Cr $ Cash 127,000.00 Accounts Receivable 151,000.00 Allowance for Bad-Debts 12,500.00 Merchandise Inventory 187,500.00 Store Supplies 58,000.00 Prepaid Insurance 72,000.00 Prepaid Rent 56,000.00 Furniture & Fixtures 800,000.00 Accumulated Depreciation: Furniture & Fixtures 256,000.00 Computer Equipment 450,000.00 Accumulated Depreciation: Computer Equipment Accounts Payable 133,500.00 Salaries Payable Interest Payable 27,000.00 Unearned Sales Revenue 82,000.00 Long-Term Loan 360,000.00 Eva Ready, Capital 898,500.00 Eva Ready, Withdrawals 104,000.00 Sales Revenue 1,043,000.00 Sales Discount 7,000.00 Sales Returns & Allowances 5,500.00 Cost of Goods Sold 403,000.00 Salaries Expense 165,000.00 Insurance Expense Utilities Expense 87,500.00 Rent Expense 126,000.00 Depreciation Expense – Furniture & Fixtures Depreciation Expense – Computer Equipment Store Supplies Expense Gain on Disposal of Old Computer Equipment 14,000.00 Bad-Debt Expense Interest Expense 27,000.00 Total 2,826,500.00 2,826,500.00 The following additional information is available at June 30, 2020: Store Supplies on hand at June 30, 2020 amounted to $25,000. Insurance of $72,000 was paid on May 1, 2020 for the 6-months to October 31, 2020 Rent was paid on March 31, 2020 for the 4-months to July 31, 2020. The furniture and fixtures have an estimated useful life of 10 years and is being depreciated on the straight-line method down to a residual value of $160,000. The computer equipment was acquired on March 31, 2020 and is being depreciated over 5 years on the double-declining balance method of depreciation, down to a residue of $30,000 Salaries earned by employees not yet paid amounted to $14,000 at June 30, 2020 Accrued interest expense as of June 30, 2020, $9,000 At June 30, 2020, $48,000 of the previously unearned sales revenue had been earned The aging of the Accounts Receivable schedule at June 30, 2020 indicated that the Allowance for Bad Debts should be $19,500 After making all other adjustments, a physical count of inventory was done, which reveals that there was $186,000 worth of inventory on hand at June 30,2020 The business is expected to make principal payments totalling $90,000 towards the loan during the fiscal year to June 30 ,2021 Required: Prepare the necessary adjusting journal entries on June 30, 2020 (Narrations are not required). Prepare the Adjusted Trial balance for the period ending June 30, 2020.
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.
Below is the
| Ready Hospital Supplies | ||
| Trial Balance as at June 30, 2020 | ||
| Dr $ | Cr $ | |
| Cash | 127,000.00 | |
| 151,000.00 | ||
| Allowance for Bad-Debts | 12,500.00 | |
| Merchandise Inventory | 187,500.00 | |
| Store Supplies | 58,000.00 | |
| Prepaid Insurance | 72,000.00 | |
| Prepaid Rent | 56,000.00 | |
| Furniture & Fixtures | 800,000.00 | |
| 256,000.00 | ||
| Computer Equipment | 450,000.00 | |
| Accumulated Depreciation: Computer Equipment | ||
| Accounts Payable | 133,500.00 | |
| Salaries Payable | ||
| Interest Payable | 27,000.00 | |
| Unearned Sales Revenue | 82,000.00 | |
| Long-Term Loan | 360,000.00 | |
| Eva Ready, Capital | 898,500.00 | |
| Eva Ready, Withdrawals | 104,000.00 | |
| Sales Revenue | 1,043,000.00 | |
| Sales Discount | 7,000.00 | |
| Sales Returns & Allowances | 5,500.00 | |
| Cost of Goods Sold | 403,000.00 | |
| Salaries Expense | 165,000.00 | |
| Insurance Expense | ||
| Utilities Expense | 87,500.00 | |
| Rent Expense | 126,000.00 | |
| Depreciation Expense – Furniture & Fixtures | ||
| Depreciation Expense – Computer Equipment | ||
| Store Supplies Expense | ||
| Gain on Disposal of Old Computer Equipment | 14,000.00 | |
| Bad-Debt Expense | ||
| Interest Expense | 27,000.00 | |
| Total | 2,826,500.00 | 2,826,500.00 |
The following additional information is available at June 30, 2020:
- Store Supplies on hand at June 30, 2020 amounted to $25,000.
- Insurance of $72,000 was paid on May 1, 2020 for the 6-months to October 31, 2020
- Rent was paid on March 31, 2020 for the 4-months to July 31, 2020.
- The furniture and fixtures have an estimated useful life of 10 years and is being
depreciated on the straight-line method down to a residual value of $160,000. - The computer equipment was acquired on March 31, 2020 and is being depreciated over 5 years on the double-declining balance method of depreciation, down to a residue of $30,000
- Salaries earned by employees not yet paid amounted to $14,000 at June 30, 2020
- Accrued interest expense as of June 30, 2020, $9,000
- At June 30, 2020, $48,000 of the previously unearned sales revenue had been earned
- The aging of the Accounts Receivable schedule at June 30, 2020 indicated that the Allowance for
Bad Debts should be $19,500 - After making all other adjustments, a physical count of inventory was done, which reveals that there was $186,000 worth of inventory on hand at June 30,2020
- The business is expected to make principal payments totalling $90,000 towards the loan during the fiscal year to June 30 ,2021
Required:
- Prepare the necessary
adjusting journal entries on June 30, 2020 (Narrations are not required). - Prepare the Adjusted Trial balance for the period ending June 30, 2020.
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