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The Unadjusted Trial Balance has been prepared (provided below and also in Three

ID: 2527147 • Letter: T

Question

The Unadjusted Trial Balance has been prepared (provided below and also in ThreeBrothers worksheet.xlsx), showing only those accounts with a non-zero balance. You have gathered the following information that will be helpful in preparing any necessary adjusting entries (add any accounts necessary). Good luck!

ThreeBrothers

Unadjusted Trial Balance

Dec. 31, 2017

debit

credit

Cash

4,400,000

Accounts Receivable

22,500,000

Allowance for Bad Debts

20,000

Inventory

2,500,000

Purchases

85,832,500

Construction in Progress Inventory

36,000,000

Billings on Contract

35,000,000

PP&E

60,000,000

Accumulated Depreciation

36,000,000

Accounts Payable

18,000,000

Income Tax Payable

136,000

Common Stock

1,500,000

Retained Earnings

33,444,000

Sales Revenue

134,500,000

Sales Returns

2,017,500

NEWPROD Revenue

9,000,000

FITTRACKER Revenue

10,000,000

Cost of NEWPROD Sold

8,100,000

Cost of FITTRACKER Sold

4,500,000

General and Admin

51,750,000

     TOTAL

277,600,000

277,600,000

ThreeBrothers uses a periodic FIFO inventory system for its normal operations. A physical inventory count indicated 40,000 units on hand at the end of 2017.

                                    PURCHASES FOR 2017(normal operations)

Beginning units:

5,000 units @ $500 each

Purchases:

   Apr - May   

40,000 units @ $500 each

   Jun - Jul      

35,000 units @ $505 each

   Aug - Sep  

48,500 units @ $515 each

   Oct             

24,000 units @ $520 each

   Nov - Dec

20,000 units @ $535 each

Question - ThreeBrothers uses straight-line depreciation and all fixed assets were purchased at the beginning of 2014 and have a 5-year useful life. No depreciation entries have been recorded in 2017.

I need the adjusting journal entry and closing journal entry - for the question, if necessary. Thank You.

ThreeBrothers

Unadjusted Trial Balance

Dec. 31, 2017

debit

credit

Cash

4,400,000

Accounts Receivable

22,500,000

Allowance for Bad Debts

20,000

Inventory

2,500,000

Purchases

85,832,500

Construction in Progress Inventory

36,000,000

Billings on Contract

35,000,000

PP&E

60,000,000

Accumulated Depreciation

36,000,000

Accounts Payable

18,000,000

Income Tax Payable

136,000

Common Stock

1,500,000

Retained Earnings

33,444,000

Sales Revenue

134,500,000

Sales Returns

2,017,500

NEWPROD Revenue

9,000,000

FITTRACKER Revenue

10,000,000

Cost of NEWPROD Sold

8,100,000

Cost of FITTRACKER Sold

4,500,000

General and Admin

51,750,000

     TOTAL

277,600,000

277,600,000

Explanation / Answer

Answer

Calculation of Depriciation for 2017 = $60,000,000/5 = $12,000,000

Calculation of closing Inventory = ThreeBrothers is using FIFO so inventory which has been bought at last will go to stock

Nov - Dec - 20,000 units @ $535 each = $10,700,000

Oct   - 20000 Units @$520 each = $10,400,000

So closing Inventory Value = $10,700,000+ $10,400,000 = $21,100,000

So Increase/ (Decrease) in Inventory = $21,100,000 -$2,500,000 (Closing - Opening) = $18,600,000

Journal Entries

(To transfer profit of 2017 to retained earning by assuming no Interest and Tax)

Thanks

Journal Entry Dr Cr Inventory Dr 18,600,000 Cost of Goods sold credit 18,600,000 (To record diff in opening and closing inventory) Depriciation 12,000,000 Accumulated Depreciation 12,000,000 (To record depriciation for 2017) Sales Revenue Account 134,500,000 NEWPROD Revenue Account 9,000,000 FITTRACKER Revenue Account 10,000,000 Sales Return Account 2,017,500 Depriciation Account 12,000,000 Purchase Account 85,832,500 Cost of NEWPROD Sold Account 9,000,000 Cost of FITTRACKER Sold Account 10,000,000 General and Admin Account 51,750,000 Cost of Goods sold credit 18,600,000 Profit and Loss Account 1,500,000 (Adjustment entry for 2017 end) Profit and Loss Account 1,500,000 Retained Earning 1,500,000

(To transfer profit of 2017 to retained earning by assuming no Interest and Tax)

Thanks

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