Problem 3 Inventories, Depreciation & Accounting for Receivables Chad Goldman was operating a gold business on his own prior to starting the Company, Goldy Inc. in July 2021. He has to organize his financial records and asked for your assistance in specific areas. The following information about the company for the month of July 2021, is as follows: July 1 July 1 July 3 Beginning inventory 100 gold at a cost of $340 per gold unit. Purchased equipment for $280,000. Purchased 200 gold at a cost of $350 each. July 5 Sold 180 gold for $730 each. July 10 75 gold units from the sale on July 5 were returned to inventory. July 11 Purchased 350 gold at a cost of $380 each. July 25 Sold 400 gold for $750 each. Purchased a building with a cash price of $450,000, Člosing Cost amounted to $25,000 and remodeling charges of $45,000. July 31 NOTES: v The company implemented the FIFO cost flow assumption and a perpetual inventory system. The building purchased on July 31 has an estimated useful life of 8 years and residual value of $40,000. The building uses the straight-line method of depreciation. V The equipment purchased on July 1 has an estimated useful life of the 5 years and a residual value of $30,000. The equipment uses the double-declining method of depreciation. V The company financial year-end is December 31st and a credit balance of $3,800 in Allowance for Doubtful Accounts.
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.
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