Exercise 2. The following information was obtained from a review of the ledger and other records of 2Moons Company at the close of the current fiscal year ending December 31, 2020. Write the adjusting entry and computation as description in your notebook. a. The office supplies expense account has a debit balance of P38,610. The inventory of office supplies on hand as of December 31, totals P14,760. b. The rent expense account has a debit balance of P74,400 composed of the following: (1) January 1 balance of P16,800 representing rent for January through April 2020; and (2) debit balance of P57,600 representing payment for a one-year beginning May 2020. c. The prepaid insurance account has a debit balance of P62,640 on December 31. Details of the policies acquired during the past year are as follows: Type of Policy Premium Paid Date Started Fire Insurance P 12,960 January 2 Accident Insurance 24,480 March 1 Car Insurance 9,360 June 1 Life Insurance 15,840 August 1 d. The balance of the commissions income account includes a P25,500 commissions received in advance for selling ten refrigerators. As of December 31, only four refrigerators were sold. e. The prepaid advertising account has a debit balance of P14,040 which represent the advance payment of a yearly contract for a uniform amount of space in 52 consecutive issues of a weekly publication. As of December 31, advertisements had appeared in 18 issues of publication. f. The unearned rent account has a credit balance of P59,040 which represent a 6-month rent received in advance from a tenant on September 1. g. The company acquired an item of equipment for P288,000 at the beginning of the year. This equipment was estimated to have a life of 15 years with a residual value of P36,000. h. A delivery truck was purchased on June 30 at a total cost of P936,000. This truck was estimated to have a useful life of 10 years with the scrap value of P192,000. i. The company pays a total of P27,000 every Saturday for a six-day-workweek ending Saturday. The last payday was December 26. j. Allowance for bad debts at the end of the year is P15,000 but the allowance at the before adjustment is P6,000 (debit). k. Allowance for bad debts at the end of the year is P15,000 but the allowance at the before adjustment is P6,000 (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.
Exercise 2. The following information was obtained from a review of the ledger and other records of
2Moons Company at the close of the current fiscal year ending December 31, 2020. Write the
entry
a. The office supplies expense account has a debit balance of P38,610. The inventory of office
supplies on hand as of December 31, totals P14,760.
b. The rent expense account has a debit balance of P74,400 composed of the following: (1)
January 1 balance of P16,800 representing rent for January through April 2020; and (2) debit
balance of P57,600 representing payment for a one-year beginning May 2020.
c. The prepaid insurance account has a debit balance of P62,640 on December 31. Details of the
policies acquired during the past year are as follows:
Type of Policy Premium Paid Date Started
Fire Insurance P 12,960 January 2
Accident Insurance 24,480 March 1
Car Insurance 9,360 June 1
Life Insurance 15,840 August 1
d. The balance of the commissions income account includes a P25,500 commissions received in
advance for selling ten refrigerators. As of December 31, only four refrigerators were sold.
e. The prepaid advertising account has a debit balance of P14,040 which represent the advance
payment of a yearly contract for a uniform amount of space in 52 consecutive issues of a weekly
publication. As of December 31, advertisements had appeared in 18 issues of publication.
f. The unearned rent account has a credit balance of P59,040 which represent a 6-month rent
received in advance from a tenant on September 1.
g. The company acquired an item of equipment for P288,000 at the beginning of the year. This
equipment was estimated to have a life of 15 years with a residual value of P36,000.
h. A delivery truck was purchased on June 30 at a total cost of P936,000. This truck was estimated
to have a useful life of 10 years with the scrap value of P192,000.
i. The company pays a total of P27,000 every Saturday for a six-day-workweek ending Saturday.
The last payday was December 26.
j. Allowance for
adjustment is P6,000 (debit).
k. Allowance for bad debts at the end of the year is P15,000 but the allowance at the before
adjustment is P6,000 (credit).
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