Adjusting and Closing Entries and Post Closing Trial Balance
Data for adjustments at December 31, 2008, are as follows:
(a) Taipei International uses a perpetual inventory system.
(b) An analysis of Accounts Receivable reveals that the appropriate year end balance in
Allowance for Bad Debts is $750.
(c) Equipment depreciation for the year totaled $32,000.
(d) A recheck of the inventory count revealed that goods costing $5,600 were wrongly excluded from ending inventory. The goods in question were not shipped until January 3, 2009. A related receivable for $8,200 was also mistakenly recorded.
(e) Interest on the note payable has not been accrued. The note was issued on March 1, 2008, and the interest rate is 12%.
(f) The balance in Insurance Expense represents $3,000 that was paid for a 1 year policy on October 1. The policy went into effect on October 1.
(g) Dividends totaling $7,800 were declared on December 25.The dividends will not be paid until January 15, 2009. No entry was made.
|
Taipei International Corporation |
||
|
|
Debit |
Credit |
|
Cash |
$ 31,500 |
|
|
Accounts Receivable |
25,000 |
|
|
Allowance for Bad Debts |
|
$ 250 |
|
Inventory |
41,700 |
|
|
Equipment |
190,000 |
|
|
Accumulated Depreciation—Equipment |
|
51,000 |
|
Accounts Payable |
|
31,000 |
|
Notes Payable |
|
70,000 |
|
Wages Payable |
|
8,000 |
|
Income Taxes Payable |
|
6,500 |
|
Common Stock |
|
40,000 |
|
Retained Earnings |
|
34,100 |
|
Sales Revenue |
|
310,000 |
|
Interest Revenue |
|
12,000 |
|
Cost of Goods Sold |
205,250 |
|
|
Wages Expense |
45,000 |
|
|
Interest Expense |
3,200 |
|
|
Utilities Expense |
6,000 |
|
|
Insurance Expense |
3,000 |
|
|
Advertising Expense |
5,000 |
|
|
Income Tax Expense |
7,200 |
|
|
Totals |
$562,850 |
$562,850 |
Instructions:
1. Journalize the necessary adjusting entries. (Ignore income tax effects.)
2. Journalize the necessary closing entries.
3. Prepare a post closing trial balance.
4. Can a company pay dividends in a year in which it has a net loss? Can a company owe income taxes in a year in which it has a net loss?