Prepare in journal entry form all adjusting and correcting journal entries based
ID: 2556113 • Letter: P
Question
Prepare in journal entry form all adjusting and correcting journal entries based on the following information. All information was provided to you as of 12/31/2018.
m. Accounting Creations started to lease some new retail space in 2018 and added shelving and fixtures to this leased space. Based on your review of invoices, the previous accountant capitalized the cost of fixtures but did not capitalize the shipping and installation costs of $3,514. These costs were expensed and recorded as a miscellaneous selling expense. Accounting Creations has decided to use double declining balance (DDB) depreciation for this item and to take a full year of depreciation in the year of acquisition. The leasehold improvements have a useful life of 15 years with a salvage value of $15,000.
n. Accounting Creations uses the FIFO Inventory Method in valuing inventory. The inventory balance of $425,000 was based on a physical count at 12/31/2018. Based on your analysis, you have noted that $12,500 of marketing games that belonged to Marketing Majors Inc. was included in the account. You also note that $7,000 of goods shipped to Accounting Creations f.o.b. destination were in transit on December 31, 2018 and included in the physical count.
o. You note during the review of sales, that a rebate was issued for the 2018 Income Tax Game to encourage sales. 34,000 games were sold. Customers can mail in their receipt and receive a $1 rebate per game. It is estimated that 60% of customers will send in the rebate. The rebate expires on January 31, 2019. To date, 8,000 customers have sent in the rebate and $16,000 has been refunded. Without any direction, the accounting clerk debited Miscellaneous Selling Expense and credited Cash for the $16,000. The management of Accounting Creations would prefer to have this type of expense in a separate account (Rebate Expense) so they can properly analyze for future ideas.
Accounting Creations has a straight tax rate of 35%. Income tax expense is Net Income before taxes times 35%. (Hint: Prepare the Income Statement up to Net Income before Taxes and then record this adjusting journal entry.)
ance for Doubtful Accounts - 17,000 Interest Receivable - - Merchandise Inventory 425,000 - Prepaid Insurance - - LIFO Reserve - 32,000 Prepaid Advertising - - Prepaid Rent 17,000 - Office Supplies 6,000 - Note Receivable 25,000 Available for Sale Securities 375,000 - Office Building 3,750,000 - Accumulated Depreciation - Office Building - 87,500 Storage Building 1,275,000 - Accumulated Depreciation - Storage Building - - Land 750,000 - Leasehold Improvements 225,000 - Accumulated Depreciation - Leasehold Improvements - - Office Equipment 325,000 - Accumulated Depreciation - Office Equipment - 65,000 Patent 150,000 - Accounts Payable - 345,000 Sales Tax Payable - - Salaries Payable - 142,000 Payroll Taxes Payable - 25,000 Interest Payable - - Income Tax Payable - - Unearned Rent Revenue - - Loan Payable - Onstar Bank - 650,000 Loan Payable - Coldstar Bank - 2,000,000 Common Stock - 650,000 Additional Paid in Capital - 1,998,750 Retained Earnings - 920,000 Accumulated Other Comprehensive Income - 25,000 Dividends 84,750 - Sales - 4,528,200 Sales Returns and Allowances 42,250 - Sales Discounts 19,250 - Cost of Goods Sold 1,979,500 - Sales Salaries Expense 436,400 - Office Salaries Expense 274,000 - Advertising Expense 16,000 - Depreciation Expense - Office Building - Depreciation Expense - Leasehold Improvements - - Depreciation Expense - Office Equipment - - Leasing Expense - Stores 132,000 - Miscellaneous Selling Expense 23,000 - Research & Development Expense 15,000 Rent Expense - Storage Facility - - Insurance Expense 15,000 - Office Supplies Expense 35,000 - Miscellaneous Administrative Expense 9,170 - Rent Revenue - 75,000 Interest Revenue on Note Receivable - - Dividend Revenue on AFS Securities - 25,000 Interest Expense - - Bad Debt Expense 35,000 - Amortization Expense - - Income Tax Expense - - Payroll Taxes Expense 121,150 - 11,585,450 11,585,450Explanation / Answer
Statement of Income for the year ended 31 Mar 2018. Income Amount(Rs) Amount(Rs) Sales 4,528,200.00 Less: Sales Discounts 19,250.00 Less: Sales Returns & Allowances 42,250.00 4,466,700.00 Other Income Rent Revenue 75,000.00 Dividend Revenue on AFS Securities 25,000.00 100,000.00 Expenses Cost of goods Sold 1,979,500.00 Add: Stock of Marketing Majors included 12,500.00 1,992,000.00 Sales Salaries Expenses 436,400.00 Office Salaries Expenses 274,000.00 Advertising Expenses 16,000.00 Leasing Expenses 132,000.00 Miscellaneous Selling Expenses 23,000.00 Less: Capitalization of Shipping & installation cost of fixtures 3,514.00 Less: Rebate Expenses 16,000.00 3,486.00 Rebate Expenses 16,000.00 Research & Development expenses 15,000.00 Insurance Expenses 15,000.00 Office supplies Expenses 35,000.00 Depreciation on Leasehold Fixtures 28,468.00 Provision for Rebate expenses 4,400.00 Miscellaneous Administrative expenses 9,170.00 Bad debt expenses 35,000.00 3,011,924.00 Net income before taxes 1,554,776.00 Journal Entries Date Particulars Amount Amount 31-Dec-18 Office Supplies Account Dr 3514 To Statement of Profit & loss account 3514 31-Dec-18 SPL A/c Dr 12500 To Inventory A/c 12500 31-Dec-18 SPL A/c Dr 4400 Provision for Rebate expenses 4400