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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