On December 31, 2018, the balances of the accounts appearing in the ledger of Wyman Company are as follows: Cash $13,500 Accounts receivable 72,000 Inventory, January 1, 2018 257,000 Estimated returns inventory, January 1, 2018 35,000 Office supplies 3,000 Prepaid insurance 4,500 Land 150,000 Store equipment 270,000 Accumulated depreciation-store equipment 55,900 Office equipment 78,500 Accumulated depreciation-office equipment 16,000 Accounts payable 77,800 Salaries payable 3,000 Customer refunds payable 50,000 Unearned rent 8,300 Notes payable 50,000 Common stock 150,000 Retained earnings 365,600 Dividends 25,000 Sales 3,280,000 Purchases 2,650,000 Purchases returns and allowances 93,000 Purchases discounts 37,000 Freight in 48,000 Sales salaries expense 300,000 Advertising expense 45,000 Delivery expense 9,000 Depreciation expense-store equipment 6,000 Miscellaneous selling expense 12,000 Office salaries expense 175,000 Rent expense 28,000 Insurance expense 3,000 Office supplies expense 2,000 Depreciation expense-office equipment 1,500 Miscellaneous administrative expense 3,500 Rent revenue 7,000 Interest expense 2,000 Required: 1. Does Wyman Company use a periodic inventory system or perpetual inventory system? Which account listed would not be used under both inventory systems? 2. Prepare a multiple-step income statement for Wyman Company for the year ended December 31, 2018. The inventory as of December 31, 2018, was $305,000. The estimated cost of customer returns inventory for December 31, 2018, is estimated to increase to $40,000. Be sure to complete the statement heading. Refer to the Instructions and the list of Labels and Amount Descriptions for the exact wording of text entries. Negative amount should be indicated by the minus sign. Colons (:) will fill in where needed. 3. Prepare the closing entries for Wyman Company as of December 31, 2018. Refer to the Chart of Accounts for exact wording of account titles.
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.
| Cash | $13,500 |
| Accounts receivable | 72,000 |
| Inventory, January 1, 2018 | 257,000 |
| Estimated returns inventory, January 1, 2018 | 35,000 |
| Office supplies | 3,000 |
| Prepaid insurance | 4,500 |
| Land | 150,000 |
| Store equipment | 270,000 |
| Accumulated depreciation-store equipment | 55,900 |
| Office equipment | 78,500 |
| Accumulated depreciation-office equipment | 16,000 |
| Accounts payable | 77,800 |
| Salaries payable | 3,000 |
| Customer refunds payable | 50,000 |
| Unearned rent | 8,300 |
| Notes payable | 50,000 |
| Common stock | 150,000 |
| 365,600 | |
| Dividends | 25,000 |
| Sales | 3,280,000 |
| Purchases | 2,650,000 |
| Purchases returns and allowances | 93,000 |
| Purchases discounts | 37,000 |
| Freight in | 48,000 |
| Sales salaries expense | 300,000 |
| Advertising expense | 45,000 |
| Delivery expense | 9,000 |
| Depreciation expense-store equipment | 6,000 |
| Miscellaneous selling expense | 12,000 |
| Office salaries expense | 175,000 |
| Rent expense | 28,000 |
| Insurance expense | 3,000 |
| Office supplies expense | 2,000 |
| Depreciation expense-office equipment | 1,500 |
| Miscellaneous administrative expense | 3,500 |
| Rent revenue | 7,000 |
| Interest expense | 2,000 |
| Required: | |
| 1. | Does Wyman Company use a periodic inventory system or perpetual inventory system? Which account listed would not be used under both inventory systems? |
| 2. | Prepare a multiple-step income statement for Wyman Company for the year ended December 31, 2018. The inventory as of December 31, 2018, was $305,000. The estimated cost of customer returns inventory for December 31, 2018, is estimated to increase to $40,000. Be sure to complete the statement heading. Refer to the Instructions and the list of Labels and Amount Descriptions for the exact wording of text entries. Negative amount should be indicated by the minus sign. Colons (:) will fill in where needed. |
| 3. | Prepare the closing entries for Wyman Company as of December 31, 2018. Refer to the Chart of Accounts for exact wording of account titles. |
| 4. | What would be the net income if the perpetual inventory system had been used? |
| CHART OF ACCOUNTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Wyman Company | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General Ledger | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Labels | |
| Administrative expenses | |
| Cost of goods sold | |
| Cost of merchandise purchased | |
| December 31, 2018 | |
| For the Year Ended December 31, 2018 | |
| Operating expenses | |
| Other revenue and expense | |
| Selling expenses | |
| Amount Descriptions | |
| Cost of goods sold before estimated returns | |
| Gross profit | |
| Increase in estimated returns inventory | |
| Income from operations | |
| Inventory available for sale | |
| Inventory, December 31, 2018 | |
| Inventory, January 1, 2018 | |
| Net income | |
| Net loss | |
| Net purchases | |
| Total cost of merchandise purchased | |
| Total administrative expenses | |
| Total operating expenses | |
| Total selling expenses |
2. Prepare a multiple-step income statement for Wyman Company for the year ended December 31, 2018. The inventory as of December 31, 2018, was $305,000. The estimated cost of customer returns inventory for December 31, 2018, is estimated to increase to $40,000. Be sure to complete the statement heading. Refer to the Instructions and the list of Labels and Amount Descriptions for the exact wording of text entries. Negative amount should be indicated by the minus sign. Colons (:) will fill in where needed.
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