Golden Wedding Dress Company designs custom wedding dresses for brides to be. Th
ID: 2610857 • 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
1
Advance Sales Dr
46,800
To Sales
46,800
(To record adjustment for earned sales)
Adjustment amount =234000*20%
2
Warranty Expense
37,012
To Estimated Warranty Liability
37,012
(To record estimated warranty liability)
Sales from Unadjusted TB
1,363,000
Less: Sales returns
9,400
Add: Additional sales from entry 1
46,800
Adjusted Net Sales
1,400,400
Warranty liability - 3% of Adjuste net sales
42,012
Existing warranty liability
5,000
Additional provision required
37,012
3
Interest expense
1,680
To Accrued Interest
1,680
(To accrue interest on 4%, 5-Year note payable for the three months October, November and December)
Interest expense = 168000*4%*3/12
4
Interest expense
9,254
To Accrued Interest
9,254
Interest expense = 9305*363/365
5
Bad and Doubtful debts expenses A/c Dr
226
To Allowance for doubtful debts
226
Accounts receivable
82,600
Provision - 1% of A/R
826
Existing provision
600
Additional provision required (826-600)
226
6
Loss due to Shrinkage
10,000
To Merchandise Inventory
10,000
(To record loss due to shrinkage)
Inventory in books
73,400
Less: Physical Inventory
63,400
Loss
10,000
7
Income tax expense a/c Dr
4,401
To Income tax liability
4,401
(To record income tax payable)
Sales
1,363,000
Less: Returns and allowances
9,400
Add: Adjustment
46,800
Net Sales
1,400,400
Other operating expenses
1,179,000
Warranty expense
37,012
Interest expense
10,934
Bad and doubtful debts expense
226
Loss due to Shrinkage
10,000
Total expenses
1,237,172
Net Income
163,228
Income tax @40%
65,291
Income tax paid
60,890
Income tax payable
4,401
GOLDEN WEDDING DRESS COMPANY
Balance Sheet
31-Dec-17
Assets
Current assets:
Cash
88,900
Merchandise Inventory
63,400
Accounts Receivable
82600
Less: Allowance for Doubtful Accounts
826
Net Accounts Receivable
81,774
Total current assets
234,074
Property, plant and equipment:
Land
139,000
Building
451000
Less: Accumulated Depreciation - Building
134000
Building
317,000
Equipment
655000
Less: Accumulated Depreciation - Building
350000
Equipment
305,000
Total property, plant and equipment
761,000
Total assets
995,074
Liabilities
Current liabilities:
Advance Sales
187,200
Estimate Warranty Liability
42,012
Accrued Interest
10,934
Income tax payable
4,401
Total current liabilities
244,547
Non-current liabilities:
Mortgage Payable
232,625
Note Payable
168,000
Total Non current Liabilities
400,625
Total liabilities
645,172
Equity
Sarah Golden, Capital
251,965
Net Income
97,937
Total Equity
349,902
Total liabilities and equity
995,074
1
Advance Sales Dr
46,800
To Sales
46,800
(To record adjustment for earned sales)
Adjustment amount =234000*20%
2
Warranty Expense
37,012
To Estimated Warranty Liability
37,012
(To record estimated warranty liability)
Sales from Unadjusted TB
1,363,000
Less: Sales returns
9,400
Add: Additional sales from entry 1
46,800
Adjusted Net Sales
1,400,400
Warranty liability - 3% of Adjuste net sales
42,012
Existing warranty liability
5,000
Additional provision required
37,012
3
Interest expense
1,680
To Accrued Interest
1,680
(To accrue interest on 4%, 5-Year note payable for the three months October, November and December)
Interest expense = 168000*4%*3/12
4
Interest expense
9,254
To Accrued Interest
9,254
Interest expense = 9305*363/365
5
Bad and Doubtful debts expenses A/c Dr
226
To Allowance for doubtful debts
226
Accounts receivable
82,600
Provision - 1% of A/R
826
Existing provision
600
Additional provision required (826-600)
226
6
Loss due to Shrinkage
10,000
To Merchandise Inventory
10,000
(To record loss due to shrinkage)
Inventory in books
73,400
Less: Physical Inventory
63,400
Loss
10,000
7
Income tax expense a/c Dr
4,401
To Income tax liability
4,401
(To record income tax payable)
Sales
1,363,000
Less: Returns and allowances
9,400
Add: Adjustment
46,800
Net Sales
1,400,400
Other operating expenses
1,179,000
Warranty expense
37,012
Interest expense
10,934
Bad and doubtful debts expense
226
Loss due to Shrinkage
10,000
Total expenses
1,237,172
Net Income
163,228
Income tax @40%
65,291
Income tax paid
60,890
Income tax payable
4,401
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.