for On December 31,2016 The following trial balance before adjustments is snowcr

Question

for On December 31,2016 The following trial balance before adjustments is snowcrest LTD. Debits Credits S 10,000 24,000 2,000 3.000 56,000 Cash Inventory Advances to employees Supplies Equipment Accumulated depreciation, equipment Unearned revenue Bank loan payable Common shares Retained earnings Sales revenue Cost of goods sold Wages expense Repairs and maintenance expense Rent expense Miscellaneous expense Dividends declared Totals $ 4,000 6,000 20,000 40,000 9,000 230,000 130,000 4,000 25,000 6,600 15,000 3.400 $309,000 309 Data for adjusting entries: 1. As at December 3 1,20 16,80% of the wages that had been paid in advance to the salespeople had been earned. 2. A count of the supplies at year end revealed that $600 of supplies were still on hand. 3. Depreciation on the equipment for 2016 was $1,000. 4. The unearned revenue was advance receipts for future deliveries of goods. By December 31, 2016, two thirds of these deliveries had been made The bank loan was a six-month loan taken out on October 1, 2016. The interest rate on the loan is 996, but the interest is not due to be paid until the note is repaid on April 1, 2017. Salaries owed at year end and not yet recorded were $500. The rent expense figure includes $600 paid in advance for January 2017. Income tax for the year should be calculated using a tax rate of 25%. (Hint: After you finish the other adjusting entries, determine the income before income tax and then calculate the tax as 25% of this amount.) 5. 6. 7. 8, Required: Prepare the adjusting entries for the year 2016.

Explanation / Answer

S.no General Journal Debit Credit 1 Sales commissions (expense) 1600 Advances to salespeople 1600 2000*80% 2 Office supplies expense 2400 Office supplies 2400 3000-600 3 Depreciation expense 1000 Accumulated depreciation 1000 4 Deposits from Customers 4000 Sales 4000 6000*2/3 5 Interest Expense 450 Interest Payable 450 ($20,000 x 9% x 3/12 = $450) 6 Office salaries expense 500 Salaries payable 500 7 Prepaid rent 600 Rent expense 600 8 Income tax expense 4513 Income tax payable 4513 Calculation of earnings before income tax Sales (230000+4000) 234000 Cost of goods sold -130000 Sales commissions -35600 Office salaries -25500 Miscellaneous expense -15000 Rent expense -6000 Office supplies expense -2400 Interest expense -450 Depreciation expense -1000 Income before tax 18050 Tax @ 25% 4513

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