Question

Charles, the CFO of Troy, Inc., received the following information from various experts within the company. He has asked for your help, as the company’s accountant, to determine any required year-end adjustments. Not all of the information provided will require an adjusting journal entry. All information is as of December 31, 2013.

a. After performing an inventory count on December 31, 2013, Jakob, the Controller, determined that supplies on hand were $380.

b. Justin, Troy Inc.’s investment advisor, sent Charles an email with a list of smart investments. Charles had asked for some investment suggestions since the corporation had decided to use some of their excess cash to buy stock.

c. XiaoXue, the Risk Management Officer, told Charles that insurance expense for the year was $315. All premiums had been paid in February.

d. Joshua, the Fixed Asset Manager, correctly calculated depreciation of equipment during the year of $4,950.

e. Trung, the Payroll Manager, determined that Troy Inc. had wages, unpaid but accrued, of $440.

f. Ellen, Vice President in Charge of Sales, determined that Troy Inc. had accrued revenues, earned but not recorded, of $1,000.

g. Ellen also gave Charles the information that actual Unearned Revenues on December 31, 2013 should have equaled $750.

h. Matthew, the Facilities Director, sent Charles an invoice for maintenance supplies in the amount of $100. Matthew needed Charles’ approval to pay the invoice.

i. According to Jakob, Miscellaneous Expense consisted of the following items:

            Speeding ticket for the delivery man                     $   55

            Charitable contributions                                              550

            Postage                                                                        30

            Key man Life insurance premiums (on Charles)         270

            Meals and entertainment                                            250

            Printing                                                                       70

            Life insurance premiums (for employee policies)       280

            Total Miscellaneous                                                $1,505

j. Jakob also provided the following information: interest income includes corporate bond interest of $1,000, Troy City bond interest of $1,500, savings account interest of $500; MACRS depreciation is $4,000.

INSTRUCTIONS:

Use the provided Trial Balance to set up your spreadsheet in Excel in worksheet form, including the necessary adjustments, utilizing formulas and shortcuts within Excel to calculate the year end balances which should appear on the 12/31/2013 Adjusted Trial Balance for Troy, Inc. There should be no hard coded numbers in the Adjusted Trial Balance.

Based on the information provided in the Critical Thinking Assessment, enter at the bottom of the worksheet in requirement #1, the adjusting journal entries, labeled a. thru j. and properly formatted, that would be required to adjust the Trial Balance at year end to the correct balances on your Adjusted Trial Balance.

From your Adjusted Trial Balance, in proper form prepare an Income Statement and a Balance Sheet, as well as closing journal entries for the year. There should be no hardcoded numbers in either the Income Statement or Balance Sheet.

Using the information provided by Charles, list the Book/Tax differences that would result from expenses included in Miscellaneous Expense as well as other items. Identify each difference by listing each and then indicate whether it is Temporary or Permanent and Favorable or Unfavorable. Calculate Taxable Income beginning with Net Income as adjusted by these differences.

Answer 1

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