Data for adjustments at December 31, 2013, 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, 2014. 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, 2013, 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, 2014. No entry was made.

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?

Transcribed Image Text:

Taipei International Corporation Unadjusted Trial Balance December 31, 2013 Debit 31,500 25,000 Credit Cash $ 250 Allowance for Bad Debts Inventory Equipment Accumulated Depreciation-Equipment Accounts Payable Notes Payable. Wages Payable Income Taxes Payable. Common Stock 41,700 70,000 6,500 Sales Revenue 310,000 Interest Revenue. 12,000 205,250 Wages Expense 3,200 3,000 5,000 7,200 $562,850 Totals $562,850