Best Company had the following items that require adjustment at year end. Cash for equipment rental in the amount of $3,800 was paid in advance. The $3,800 was debited to prepaid rent when paid. At year end, $2,950 of the prepaid rent had expired. Cash for insurance in the amount of $8,200 was paid in advance. The $8,200 was debited to prepaid insurance when paid. At year end, $1,850 of the prepaid insurance was still unused. Supplies at the beginning of the year showed a balance of $2,000. Best purchased supplies of $16,200 during the year. At the end of the year, a physical count of supplies showed $4,125 of supplies on hand. Required: 1. Prepare the adjusting journal entries needed at December 31. If an amount box does not require an entry, leave it blank. Dec. 31 Rent Expense fill in the blank 27781a0e1020040_2 fill in the blank 27781a0e1020040_3 Prepaid Rent fill in the blank 27781a0e1020040_5 fill in the blank 27781a0e1020040_6 Dec. 31 Insurance Expense fill in the blank 27781a0e1020040_8 fill in the blank 27781a0e1020040_9 Prepaid Insurance fill in the blank 27781a0e1020040_11 fill in the blank 27781a0e1020040_12 Dec. 31 Insurance Expense fill in the blank 27781a0e1020040_14 fill in the blank 27781a0e1020040_15 Insurance Revenue fill in the blank 27781a0e1020040_17 fill in the blank 27781a0e1020040_18 2. What is the effect on the financial statements if these adjusting entries are not made? In all these cases, was originally created when cash was paid. The adjusting entries will affect account. If these entries were not made, expenses would be and assets would be . In addition, net income will be . 3. What is the balance in prepaid equipment rent, insurance expense, and supplies at December 31? Balance in prepaid equipment rent $fill in the blank 03aa370aff8806d_1 Balance in insurance expense $fill in the blank 03aa370aff8806d_2 Balance in supplies $fill in the blank 03aa370aff8806d_3
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.
Best Company had the following items that require adjustment at year end.
- Cash for equipment rental in the amount of $3,800 was paid in advance. The $3,800 was debited to prepaid rent when paid. At year end, $2,950 of the prepaid rent had expired.
- Cash for insurance in the amount of $8,200 was paid in advance. The $8,200 was debited to prepaid insurance when paid. At year end, $1,850 of the prepaid insurance was still unused.
- Supplies at the beginning of the year showed a balance of $2,000. Best purchased supplies of $16,200 during the year. At the end of the year, a physical count of supplies showed $4,125 of supplies on hand.
Required:
1. Prepare the adjusting
| Dec. 31 | Rent Expense | fill in the blank 27781a0e1020040_2 | fill in the blank 27781a0e1020040_3 |
| Prepaid Rent | fill in the blank 27781a0e1020040_5 | fill in the blank 27781a0e1020040_6 | |
| Dec. 31 | Insurance Expense | fill in the blank 27781a0e1020040_8 | fill in the blank 27781a0e1020040_9 |
| Prepaid Insurance | fill in the blank 27781a0e1020040_11 | fill in the blank 27781a0e1020040_12 | |
| Dec. 31 | Insurance Expense | fill in the blank 27781a0e1020040_14 | fill in the blank 27781a0e1020040_15 |
| Insurance Revenue | fill in the blank 27781a0e1020040_17 | fill in the blank 27781a0e1020040_18 |
2. What is the effect on the financial statements if these
In all these cases, was originally created when cash was paid. The adjusting entries will affect account.
If these entries were not made, expenses would be and assets would be . In addition, net income will be .
3. What is the balance in prepaid equipment rent, insurance expense, and supplies at December 31?
| Balance in prepaid equipment rent | $fill in the blank 03aa370aff8806d_1 |
| Balance in insurance expense | $fill in the blank 03aa370aff8806d_2 |
| Balance in supplies | $fill in the blank 03aa370aff8806d_3 |
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