Information necessary to prepare the year-end adjusting entries appears below. Note: Auditors first test is to ensure the mathematical accuracy of the report received from the client. Depreciation on the machines for the year is $20,000. b. T C. On March 1, 2020, the con The average outstanding balance of Notes Payable during the year was $60,700 and average interest rate on debt was 6.5%. Only $878 Interest has been paid on these loans durin the company purchases insurance for $24,000 for a one-year policy to cover possible injury to mechanics. The entire $24,000 was debited to Prepaid Insurance at the time of the purchase. d. $18,000 of supplies was pu pplies was purchased on June 15, 2020. $2,000 of supplies remains on hand at December 31, 2020. On December 30, the company receives a utility bill of $3,400 for the month covering the period 11/22/20 - 12/23/20. The bill will not be paid until early January 2021, and no entry was recorded when the bill was received. Historically, Utility bills during the months of November through February are approximately the same amount and typically cover a period/cycle of 30 days. f. F Employee salaries are paid every two weeks. The last pay period ended on Friday December 24. Salaries paid on Friday Janauary 7th for the payperiod covering 12/25/20 - 1/7/21 consisted of the following (also see TM Z below for assistance with this item): Wages and Salaries $60,000 2020 Bonuses $10,000 Employee contributions to voluntary retirement pla $1,700 oyer match contributions to voluntary retirement plan $1,300 Medical insurance premiums paid by employees $5,000 Medical insurance premiums paid by employer $9,000 Life Insurance premiums paid by employer $2,500 Federal & State Income tax withheld (assume 25% tax rate for boy $12.000 Employee FICA combined tax rate 7.65% Employer FICA combined tax rate 7.65% Federal & State unemployment ta 0.80% Tickmark Explanations: F Footed XF Cross footed GL Ties to GL Does not foot - total was hardcoded in excel. Made adjustment for correct recalculated balance. Item f analysis: PoorPeace of this boss assume that retinment and health insurance benefits are deducted AFTER taxes. The journal entry below is the JET w is the JE for accrued payroll that balances for liabilities to the clients recorded liabilitys in the table above and noted any variances. We then adjusted the associated expense accounts as needed to balance the payroll at 12/31/20. entries, and noted any variances. Variances from the table above are carried down to AJE f in the conclusions section below as auditor proposed adjusting entries for accrued Accrued Payroll Journal Entries at 12/31/20 Should have been: Salaries Exp $ 70,000.00 Income Tax pay FICA tax Pay (EE) Fringe - Health Pay (EE Fringe - 401k Pay (EE) Salaries Pay to record EE salary payments Salaries Exp Fringe ben pay - 401k (ER) Fringe ben pay - health (ER Fringe ben pay - life (ER) To record ER Fringe Benefits Payroll Tax Exp FICA pay - ER in in Unemployment Pay To record ER payroll tax expenses Conclusions Auditor Proposed Adjusting entries or PAJE?: Account name Debit Credit AJE a $ $ AJE $ AJE C $ AJE d S AJE AJET Salaries Expense Payroll Tax Exp Salaries & Bonuses Payable Federal & State Income Tax Payable FICA Tax Payable Unemployment Tax Payable Benefits Payable - Health Benefits Payable - RetirementPBC Adjusted Balance Auditor Expected ENDING Balance (Audited Balance) Adjusting Entries Accounts Debits Credits Debits Credits Variance Debits Credits Reference Cash $79,359 $79,359 Accounts Receivable $28,643 $28,643 nventory $147,693 $147,693 Supplies $5,855 $2,000 $3,855 $3,855 Prepaid Insurance $10, 112 $4,000 6,112 $6, 112 Deferred Income Tax Benefits $7,752 $7.752 Intangible Assets $1,734 $1,734 Property, Plant, & Equipment 219,737 $219,737 Accumulated Depreciation $97,722 $117,722 $20,000 $20,000 Accounts Payable $46,041 $46.041 Salaries & Bonuses Payable $19,061 45,94 $26,884 $26,884 Federal & State Income Tax Payable (Payroll) $5,525 $12,000 $6,475 $6,475 FICA Tax Payable $4,628 $10,710 $6,082 $6,082 Unemployment Tax Payable $242 $56 $318 $318 Benefits Payable - Health $6,95 $14,000 $7,045 $7,045 Benefits Payable - Retirement $1,450 $3,00 $1,550 $1,550 Benefits Payable - Life Insurance $1,250 $2,50 $1,250 $1,250 Utilities Payable SO $3,400 $3,400 $3.400 Accrued Utilities SO $90 $907 $907 Interest Payable SO $3,946 3,946 $3,946 Reserve for Returns 6,100 $6,10 Accrued Profit Sharing $1,688 $1,688 Corporate Income Taxes Payable $5,432 $5,43 Notes Payable $44,066 $44.066 Deferred Income Taxes Payable $7,282 $7,282 Common Stock $5,685 $5,685 APIC $30,719 $30,719 Treasury Stock $144,362 $144,362 Retained Earnings $289,247 $289.247 Service Revenue $1,019,890 $1,019,890 Cost of Goods Sold $572, 153 $572,153 Salaries Expense $292,852 $339,097 $46,245 $46,245 Payroll Tax Expense $19,260 $22.619 $3.359 $3,359 Advertising Expense 15,135 $15,135 Depreciation Expense SO $20,000 $20.000 $20,000 Insurance Expense $13,888 $13,888 Supplies Expense $12,145 $8,290 $3,855 $3,855 Rent Expense $2,250 $2,250 Legal Fees Expense $4,650 $4,650 Utilities Expense $12,000 $16,307 $4,307 $4,307 Interest Income $989 $989 Interest Expense $878 $3,068 2.190 $2,190 Other Income so Other Expense $3,514 $3,514 Totals $6,026,000 $6,026,000 $1,656,251 $1,671,829 $140,136 $76,101 $91,679 Auditor Adjusted Totals Information necessary to prepare the year-end adjusting entries appears below. Note: Auditors first test is to ensure the mathematical accuracy of the report received from the client. a. Depreciation on the machines for the year is $20,000. b. The Average outstanding balance of Notes Payable during the year was $60,700 and average interest rate on debt was 6.5%%. Only $878 Interest has been paid on these loans during the year. On March 1, 2020, the company purchases insurance for $24,000 for a one-year policy to cover possible injury to me mechanics. The entire $24,000 was debited to Prepaid Insurance d to Prepaid Insurance at the time of the purchase. d. $18,000 of supplies was purchased on June 15, 2020. $2,000 of supplies remains on hand at December 31, 2020. e. On December 30, the company receives a utility bill of $3,400 for the month covering the period 11/22/20 - 12/23/20. The bill will not be paid until early January 2021, and no entry was recorded when the bill was received. Historically, Utility bills during the months of November through February are approximately the same amount and typically cover a period/cycle of 30 days. Wages and Salaries Employee salaries are paid every two weeks. The last pay period ended on Friday December 24. Salaries paid on Friday Janauary 7th for the payperiod covering 12/25/20 - 1/7/21 consisted of the following (also see TM Z below for assistance with this item): $60,000 2020 Bonuses $10,000 Employee contributions to voluntary retirement plan $1,700 Employer match contributions to voluntary retirement plan $1,300 Medical insurance premiums paid by employees $5,000 Medical insurance premiums paid by employer $9,000 Life Insurance premiums paid by employer $2,500 Federal & State Income tax withheld (assume 25% tax rate for bo $12,000 Employee FICA combined tax rat 7.65% Employer FICA combined tax rate 7.65% Federal & State unemployment tax 0.80% Tickmark Explanations: F Footed XF Cross footed12/31/20 12/31/20 Unadjusted Balance Adjusting Entries Adjusted Balance Accounts Debits Credits Debits Credits Reference Debits Credits Cash $25,000 $25,000 Accounts Receivable $15,000 $15,000 Supplies $27,000 $7,000 AJE E $20,000 Prepaid Insurance $36,000 $30,000 AJE D $6,000 Equipment $95,000 $95,000 Accumulated Depreciation $37,000 $15,000 AJE A $52,000 Accounts Payable $12,000 $12,000 Salaries Payable $0 $6,000 AJE B $6,000 Utilities Payable $0 $3,400 AJE F $3,400 Interest Payable $0 $1,000 AJE C $1,000 Notes Payable $50,000 $50,000 Common Stock $35,000 $35,000 Retained Earnings $10,000 $10,000 Dividends $3,000 $3,000 Service Revenue $227,000 $227,000 Salaries Expense $158,000 $6,000 AJE B $164,000 Depreciation Expense $0 $15,000 AJE A $15,000 Insurance Expense $0 $30,000 AJE D $30,000 Supplies Expense $0 $7,000 AJE E $7,000 Utilities Expense $12,000 $3,400 AJE F $15,400 Interest Expense $0 $1,000 AJE C $1,000 Totals $386,000 $386,000 $62,400 $62,400 $396,400 $396,400