On January 1, 2021, the general ledger of Dynamite Fireworks includes the following account balances:Accounts Debit CreditCash $23,800Accounts Receivable 5,200Supplies 3,100Land 50,000Accounts Payable $ 3,200Common Stock 65,000Retained Earnings 13,900Totals $82,100 $82,100During January 2021, the following transactions occur:January 2 Purchase rental space for one year in advance, $6,000 ($500/month).January 9 Purchase additional supplies on account, $3,500January 13 Provide services to customers on account, $25,500.January 17 Receive cash in advance from customers for services to be provided in the future, $3,700.January 20 Pay cash for salaries, $11,500.January 22 Receive cash on accounts receivable, $24,100.January 29 Pay cash on accounts payable, $4,000.Required:1. Record each of the transactions listed above.2. Record adjusting entries on January 31.a. Rent for the month of January has expired.b. Supplies remaining at the end of January total $2,800.c. By the end of January, $3,200 of services has been provided to customers who paid in advance on January 17.d. Unpaid salaries at the end of January are $5,800.3. Prepare an adjusted trial balance as of January 31, 2021, after updating beginning balances (above) for transactions during January (Requirement 1) and adjusting entries at the end of January (Requirement 2).4. Prepare an income statement for the period ended January 31, 2021. 5. Prepare a classified balance sheet as of January 31, 2021. 6. Record closing entries. 7. Analyze the following features of Dynamite Fireworks’ financial condition: a. What is the amount of profit reported for the month of January? b. Calculate the ratio of current assets to current liabilities at the end of January. c. Based on Dynamite Fireworks’ profit and ratio of current assets to current liabilities, indicate whether Dynamite Fireworks appears to be in good or bad financial condition.
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.
On January 1, 2021, the general ledger of Dynamite Fireworks includes the following account balances:
Accounts Debit Credit
Cash $23,800
Accounts Receivable 5,200
Supplies 3,100
Land 50,000
Accounts Payable $ 3,200
Common Stock 65,000
Retained Earnings 13,900
Totals $82,100 $82,100
During January 2021, the following transactions occur:
January 2 Purchase rental space for one year in advance, $6,000 ($500/month).
January 9 Purchase additional supplies on account, $3,500
January 13 Provide services to customers on account, $25,500.
January 17 Receive cash in advance from customers for services to be provided in the future, $3,700.
January 20 Pay cash for salaries, $11,500.
January 22 Receive cash on accounts receivable, $24,100.
January 29 Pay cash on accounts payable, $4,000.
Required:
1. Record each of the transactions listed above.
2. Record
a. Rent for the month of January has expired.
b. Supplies remaining at the end of January total $2,800.
c. By the end of January, $3,200 of services has been provided to customers who paid in advance on January 17.
d. Unpaid salaries at the end of January are $5,800.
3. Prepare an adjusted
4. Prepare an income statement for the period ended January 31, 2021.
5. Prepare a classified balance sheet as of January 31, 2021.
6. Record closing entries.
7. Analyze the following features of Dynamite Fireworks’ financial condition:
a. What is the amount of profit reported for the month of January?
b. Calculate the ratio of current assets to current liabilities at the end of January.
c. Based on Dynamite Fireworks’ profit and ratio of current assets to current liabilities, indicate whether Dynamite Fireworks appears to be in good or bad financial condition.
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