Intelligent Toys, Inc (*ITP") is a well establish toys trading company which adopts the periodic system. ITI prepares its financial statements on a monthly basis. The trial balance of ITI as at 28 February 2021 is presented as follows: Intelligent Toys, Inc Trial Balance As at 28 February 2021 Account Title Debit Credit ($) ($) 420,000 Accounts Payable Accounts Reccivable 675,000 Accumulated Depreciation - Building Accumulated Depreciation - Equipment Accumulated Depreciation - Motor Vehicle 745,200 570,000 664,668 20,250 Allowance for Doubtful Accounts Building 9,720,000 Cash 1,001,520 Dividends Payable Equipment 120,000 990,000 Interest Receivable 144,000 Long-term Investment Merchandise Inventory 750,000 975,000 832,500 2,700,000 18,000 Motor Vehicle Notes Reccivable Prepaid Insurance Retained Earnings 2,077,212 Salaries Payable Share Capital - Ordinary $1 par value, 10,000,000 shares authorized, 6,000,000 shares issued and 5,977,500 shares outstanding Share Capital – Preference 5%, $100 par value, noncumulative, 100,000 shares authorized, 60,000 shares issued and outstanding Share Premium – Ordinary 105,300 6,000,000 6,000,000 840,000 300,000 9,000 Share Premium – Preference Share Premium - Treasury Supplies Treasury Shares (22,500 shares) 9,360 56,250 17,871,630 17,871,630
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.
Prepare the double entries for the following.
The following additional information is available on 31 March 2021:
(a) Electricity incurred for the month amounted to $7,000.
(b) The employees receive a total salary of $40,500 for a five-day work week.
All employees worked for the whole month of March.
(c) (i)Building, (ii) equipment and (iii) motor vehicles are recorded at historical
cost and their estimated useful lives are 50 years, 5 years and 5 years
respectively. No residual value is expected for the building. The building
was acquired on 1 May 2017. The company uses straight-line method for all
buildings. All the equipment and motor vehicles are acquired on 1 January
2018. The company uses unit of activity method to
and the double-declining balance method to depreciate all motor vehicles.
The company expects that the salvage value of the equipment and motor
vehicles is 10 % of the purchase cost. The equipment is for packing and the
total amount of packing for 5 years are estimated to be 594,000 units. The
total packing in March amounted to 9,800 units. Annual depreciation is
calculated for each year from 1 January to 31 December, monthly
depreciation is equal to (annual depreciation / 12).
(d) Physical count showed that $4,000 of supplies and $1,186,000 of
merchandise inventory remained on hand at 31 March 2021.
(e) The bank statement balance is $1,000 greater than the cash account balance.
This is relating to an unpresented cheque of the dividends paid on 21 March
2021.
(f) The prepaid insurance was paid in last December covering a 12-month
general insurance from January to December, 2021.
(g) Allowance for
receivable balance due to dramatical down turn of the economy.
(h) Recognize interest expense for the month.
(i) Recognize interest revenue for the month
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