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CHAPTER 10 Current Liabilities Problem 10-7A Comprehensive-balance sheet LO1,2.3.4 CHECK FIGURES: 2. Total current assets- $219,386: Total assets-$926,386; Total current liabilities = $235,451 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 illnesss You have been given the following unadjusted trial balance along with some additional information for the December 31, 2017, year-end. Balance Account Accounts receivable $ 71,400 Income tax expense s 33.660 Accum, deprec., building1 Accum. deprec.. equipment... Advance sales Allowance for doubtful accounts Building Cash.. 116.000 Land 332.000 Merchandise inventory 216.000 Mortgage payable 64.800 217.997 500 Sarah Golden, capital 204.863 150,000 1.161.000 415,000 Note payable... 87.100 Other operating expenses 619.000 Sales Estimated warranty liability 3.200 Sales returns and allowances 7,600 Other information: 1. Assume all accounts have a normal balance. 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. 2. 759% a. Gol lden warranties its wedding dresses against defects and estimates its warranty liablity to be 2.5% of adjusted net sales. 4. The 3.5%, 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: Interest Expense at Dec. 31 Year 2015 2016 2017 2018 201q Payments are made annualy each aruaญ 2, $32,37q $11,346 10,505 9,630 8,720 7.774 $262.620 240,746 217.997 194,338 169,733 21,874 22,749 32.37 32.379 32.379 32,379 24.605 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 $61,600. 8. The balance in Income Tax Expense represents taxes accrued and paid for the 2017 year at the rate of $3,060 per month. Assume the income tax rate is 20% Required 1. Based on the information provided, journalize the adjusting entries at December 31, 2017. 2. Prepare a classified balance sheet (round all values on the balance sheet to whole numbers).

Answer 1

Amount in USD
Assets	Amount	Liabilities	Amount
Total current assets		Total current liabilities
Accounts receivable	71400	Advance sales	216000
Allowance for doubtful debts	-500	Estimated warranted liability	3200
Cash	87100	Note payable	150000
Merchandise inventory	69800	Debt
		Mortgage payable	217997
Property plant and equipment
Building	415000	Common stock + retained earnings
Equipment	619000	Capital	204863
Land	121000	Retained earnings	142740
Accumulated depreciation building	-116000
Accumulated depreciation equipment	-332000
	934800		934800
Journal entries
	Dr	Cr
Advance sales	54000
Sales		54000
Being 25% advances sales booked as revenue
Other operating expenses	31775
Estimated warranted liability		31775
Being 2.5% of adjusted net sales
Sales	1345000
T/f from advance sales	54000
Total sales	1399000
Provision required	34975
Provision already made	3200
Provision to be made	31775
Interest expense	6750
interest payable		6750
( interest expense booked for Jan - dec 17, assuming that interest exp for jan - sep 17 have not been accounted and paid)
Interest expense on mortgage payable	9630
interest payable		9630
( interest expense booked on mortgage payable for year 2017)
Operating expenses	214
Allowance for doubtful debts		214
Debtors	71400
Provision required @ 1%	714
Already accounted	500
Balance to be accounted	214
Loss on physical verification	8200
Inventory		8200
Income tax	1,106
income tax payable		1,106
Profit and loss before adjustments	176400
Adjustments
Allowance for doubtful debts	-214
Interest expense on mortgage payable	-9630
Interest expense	-6750
Loss on physical verification	-8200
Sales	54000
Other operating expenses	-31775
Profit after adjustment	173831
Tax rate	20%
Tax amount	34,766
income tax expense accounted	33660
Extra provision to be reversed	1,106

Revised Balance sheet after considering journal entries
Assets	Amount	Liabilities	Amount
Total current assets		Total current liabilities
Accounts receivable	71,400	Advance sales	162,000
Allowance for doubtful debts	(714)	Estimated warranted liability	34,975
Cash	87,100	Note payable and interest payable	156,750
Merchandise inventory	61,600	Income tax payable	1,106
		Debt
Property plant and equipment		Mortgage payable	217,997
Building	415,000	interest payable on mortgage	9,630
Equipment	619,000
Land	121,000	Common stock + retained earnings
Accumulated depreciation building	(116,000)	Capital	204,863
Accumulated depreciation equipment	(332,000)	Retained earnings	139,065
	926,386		926,386