Golden Wedding Dress Company designs custom wedding dresses for brides to be. Th
ID: 2609418 • Letter: G
Question
Golden Wedding Dress Company designs custom wedding dresses for brides to be. The person preparing the adjusting entries at year-end was unable to complete the adjustments due to illness. You have been given the following unadjusted trial balance along with some additional information for the December 31, 2017, year-end.
Other information:
1. Assume all accounts have a normal balance.
2. 80% of the balance in the Advance Sales account is for wedding dresses to be made and delivered by Golden during 2018; the remaining 20% is from sales earned during 2017.
3. Golden warranties its wedding dresses against defects and estimates its warranty liability to be 3% of adjusted net sales.
4. The 4%, 5-year note payable was issued on October 1, 2017; interest is payable annually each September 30.
5. A partial amortization schedule for the mortgage follows:
6. Uncollectible accounts are estimated to be 1% of outstanding receivables.
7. A physical count of the inventory showed a balance actually on hand of $63,400.
8. The balance in Income Tax Expense represents taxes accrued and paid for the 2017 year at the rate of $5,535 per month. Assume the income tax rate is 40%.
Required:
1. Based on the information provided, journalize the adjusting entries at December 31, 2017. (Round the final answers to 2 decimal places.)
1.Record to adjust for earned sales.
2.Record the estimated warranty liability.
3.Record the accrual of interest expense on the note payable.
4.Record the accrual of interest on mortgage payable.
5.Record to adjust for estimated uncollectible accounts.
6.Record to adjust for shrinkage.
7.Record the adjustment for income taxes owing.
2. Prepare a classified balance sheet. (Be sure to list the assets and liabilities in order of their liquidity. Round the final answers to the nearest whole dollar amount.)
Account UnadjustedBalance Accounts receivable $ 82,600 Accum. deprec., building 134,000 Accum. deprec., equipment 350,000 Advance sales 234,000 Allowance for doubtful accounts 600 Building 451,000 Cash 88,900 Equipment 655,000 Estimated warranty liability 5,000 Income tax expense 60,890 Land 139,000 Merchandise inventory 73,400 Mortgage payable 232,625 Sarah Golden, capital 251,965 Note payable 168,000 Other operating expenses 1,179,000 Sales 1,363,000 Sales returns and allowances 9,400
Explanation / Answer
Adjustment Entries
1.
Advance Sales A/c Dr 46800
To Sales A/c 46800
2.
Profit & Loss A/c Dr 42012
To Estimated Warrenty Liability 42012
3.
Interest on Note Payable A/c Dr 1680
To Notes Payable 1680
4.
Interest on morgage A/c Dr 9305
To Morgage A/c 9305
5.
Uncollectable A/cs Written off Dr 826
To Account Receivable 826
6.
Inventory Written off A/c Dr 10000
To Inventry A/c 10000
7.
Income Tax Expences A/c Dr 5530
To Cash A/c 5530
Income form operation calculation for the period ended 31-12-2017 for the golden wedding dress company
Net adjusted sales (1363000+46800-9400) 1400400
Less : Expences
Income Tax Expences 66420
Operating Expences 1179000
Accrued Interest on
Notes Payable 1680
Interest on morgage
Payable 9305
Uncollectible A/cs W/off 826
Inventry Written off 10000
Total Expences 133169
Provision made
for warrenty 42012
Profit transferred
to capital A/c 91157
GOLDEN WEDDING DRESS COMPANY
BALANCE SHEET
DECEMBER 31 2017
CURRENT ASSETS
Account Receievable 81774
Inventory 63400
Cash 83370
Total Current Assets 228544
Property Plant & Equipments
Land 139000
Building 451000
Euipments 655000
Total Property, Plants & Equipments 1245000
Total Assets $1473544
Liabilities
Current Liabilities
Advances Sales 187200
Estimated Warrenty Liability 47012
Allowance for Doubtful Accounts 600
Total Current Liabilities 234812
Non Current Liabilities
Accumulated Depreciation on Building 134000
Accumulated Depreciation on Equipments 350000
Notes Payable 169680
Morgage Payable 241930
Total Non Current Liabilities 895610
Equity (251965+91157) 343122
Total Liabilities & Equity $1473544
So above is the solution
Notes & Workings
1. All the figures are stated in USD ($)
2. Adjusted Net Sales = 1363000+46800-9400 1400400
3. Closing cash Balance = 88900-5530 83370
4. Closing A/c Receivable 82600-826 =81774
5. Closing Inventry = 72400-10000 = 63400
6. Estimated Warrenty Liability = 5000+42012 =47012
7. Morgage Balance = 232625+9305 = 241930
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