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
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.
Account | Unadjusted Balance | |
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 | |
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:
Year | Interest Expense | Principal Portion | Annual Payment* | Principal Balance at Dec. 31 | ||||||||
2015 | $ | 12,066 | $ | 22,113 | $ | 34,179 | $ | 279,540 | ||||
2016 | 11,182 | 22,997 | 34,179 | 256,543 | ||||||||
2017 | 10,262 | 23,917 | 34,179 | 232,625 | ||||||||
2018 | 9,305 | 24,874 | 34,179 | 207,751 | ||||||||
2019 | 8,310 | 25,869 | 34,179 | 181,883 | ||||||||
*Payments are made annually each January 2. |
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.)
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