Adjusting and Closing Entries and Post-Closing Trial Balance At the top of the following page is the… 1 answer below »
Adjusting and Closing Entries and Post-Closing Trial Balance
At the top of the following page is the trial balance for Bou Dr.eaux Company as of December 31.
Consider the following additional information:
(a) Bou Dr.eaux uses a perpetual inventory system.
(b) The prepaid expenses were paid on September 1 and relate to a 3-year insurance policy that went into effect on September 1.
(c) The unearned revenue relates to rental of an unused portion of the corporate offices. The $42,000 was received on April 1 and represents payment in advance for one year’s rental.
(d) Plant and Equipment includes $15,000 for routine equipment repairs that were erroneously recorded as equipment purchases. The repairs were made on December 30.
Debit
Credit
Cash
$ 72,000
Accounts Receivable
365,000
Inventory
52,000
Prepaid Expenses
36,000
Land
70,000
Plant and Equipment
1,254,000
Other Assets
1,275,000
Accounts Payable
$ 154,000
Wages, Interest, and Taxes Payable
218,000
Unearned Revenue
42,000
Long-Term Debt
1,190,000
Other Liabilities
297,000
Common Stock
195,000
Retained Earnings
915,000
Dividends
211,000
Sales
2,762,000
Interest Revenue
29,000
Costs of Goods Sold
1,565,000
Selling, General, and Administrative Expenses
615,000
Interest Expense
82,000
Income Tax Expense
205,000
Totals
$5,802,000
$5,802,000
(e) Other Assets include $7,000 for miscellaneous office supplies, which were purchased in mid-October. An end-of-year count reveals that only $4,200 of the office supplies remain.
(f) Selling, General, and Administrative Expenses incorrectly includes $13,000 for office furniture purchases (Other Assets). The purchases were made on December 30.
(g) Inventory erroneously includes $7,500 of inventory that Bou Dr.eaux had purchased on account but that was returned to the supplier on December 28 because of unsatisfactory quality.
1. Record the entries necessary to adjust the books.
2. Record the entries necessary to close the books. Assume the adjustments in (1) do not affect Income Tax Expense.
3. Prepare a post-closing trial balance.
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