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 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 Unadjusted Account Balance $82,400 132,000 348,000 232,000 700 447,000 88,700 651,000 4,800 33,950 137,000 73,000 231,000 223,750 166,000 1,177,000 1,361,000 9,200 Accounts receivable Accum. deprec., building Accum. deprec., equipment Advance sales Allowance for doubtful accounts Building Cash Equipment Estimated warranty liability Income tax expense Land Merchandise inventory Mortgage payable Sarah Golden, capital Note payable Other operating expenses Sales Sales returns and allowances Other information 1. Assume all accounts have a normal balance 2.75% of the balance in the Advance Sales account is for wedding dresses to be made and delivered by Golden during 2018; the remaining 25% is from sales earned during 2017 3, Golden warranties its wedding dresses against defects and estimates its warranty liability to be 2% of adjusted net sales 4. The 3%, 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 2015 2016 2017 2018 2019 Interest Expense $11,986 11,106 10,192 9,240 8,250 Principal Portion $ 21,993 22,873 23,787 24,739 25,729 Annual Payment* $ 33,979 33,979 33,979 33,979 33,979 Principal Balance at Dec. 31 277,660 254,788 231,000 206,261 180,532 Payments are made annually each January 2 6. Uncollectible accounts are estimated to be 1.5% of outstanding receivables 7. A physical count of the inventory showed a balance actually on hand of $63,200 8, The balance in Income Tax Expense represents taxes accrued and paid for the 2017 year at the rate of $3,086 per month. Assume the income tax rate is 20%

Answer 1

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1. Adjusting entries

2. Date	Particulars	Debit	Credit
   December 31, 2017	Advance sales	$58,000
   	Sales		58,000
   	(Entry recorded for adjusting earned sales of 25%)
   December 31, 2017	Warranty expenses	28,196
   	Estimated Warranty liability		28,196
   	(Being entry recorded for warranty estimates = (1,361,000 + 58,000 – 9,200)*2% = 28,196)
   December 31, 2017	Interest expense	1,245
   	Interest payable		1,245
   	(Being entry recorded for notes payable interest accrued from 1st Oct 2017 to Dec-17 = 166,000*3%*3/12 = 1245)
   December 31, 2017	Interest expense	10,192
   	Interest payable		10,192
   	(Being Interest on mortgage has been recorded)
   December 31, 2017	Allowance for doubt full debts	1236
   	Accounts receivable		1236
   	(Being 1.5% on accounts receivables classified as uncollectible = 82,400*1.5%=1,236)
   December 31, 2017	Shrinkage expenses	9,800
   	Merchandised inventory		9,800
   	(Being shrinkage has been recorded = $73,000 – 63,200 = 9,800)
   December 31, 2017	Income tax expense	3,082
   	Income tax payable		3,082
   	(Being Income tax on every month $3,086 , So =3086*12 =37032-33950)