Benson Bicycle specializes in custom painting and design of bicycles. December 31 is the company's fiscal year-end. Information necessary to prepare the year-end adjustments appears below. 1. A three-year fire insurance policy was purchased on July 1, 2024, for $19,200. The company recorded the amount in Prepaid Insurance on July 1. The cost of insurance prior to July totals $2,900. 2. Employee salaries of $25,800 for the month of December will be paid in early January. Salaries paid in the first 11 months of the year totaled $198,000. 3. On November 1, 2024, the company received $7,200 in cash from a customer requesting a custom design for six identical bikes ($1,200 each). The entire amount is recorded in Deferred Revenue on November 1. By the end of the year, four of the bikes have been completed. Other revenues generated during the year total $288,000. 4. Supplies at the beginning of the year totaled $2,800. During 2024, additional supplies of $18,800 were purchased and recorded in Supplies at the time of purchase. Supplies remaining at the end of the year total $4,800. 5. Benson paid a local radio station $12,800 for four months of advertising on December 1, 2024. The advertising will appear evenly over the four-month period. The company recorded the entire amount in Prepaid Advertising on December 1. Advertising costs the first 11 months of the year total $15,400. 6. Benson borrowed $37,200 on March 1, 2024. The principal is due to be paid in five years. Interest is payable each March 1 a an annual rate of 10%. Required: 1. Determine the adjustments needed on December 31, 2024. 2. Prepare an income statement for Benson Bicycle for the year ended December 31, 2024. Note: Amounts to be deducted should be indicated with a minus sign.
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
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