Question

The unadjusted trial balance of Morgan Manufacturing Corp. at December 31, 2019 is shown. Refer also to the additional year-end information for the company shown on the "Adjusting Entries" page (see pictures)

Required: 1 Prepare year-end adjusting entries. General ledger account numbers are not necessary. Show your calculations below each adjusting entry.

2 Post the adjusting entries to the trial balance and prepare an adjusted trial balance.

3 Using the amounts from the adjusted trial balance, complete the financial statements for the year ended December 31, 2019. Morgan Manufacturing Corp. Adjusting Entries For the Year Ended December 31, 2019

The following additional information is available at the corporation's year-end. GST of 5% only applies when indicated.

a. A sale on account has not been recorded in the amount of: $5,000 Applicable sales tax is: 8%

b. Warranty expense for the year as a percentage of sales should be: 2%

c. Unpaid gross salaries at year-end amount to: $10,000 Deductions from unpaid salaries are as follows: Employee Company Portion Portion Employee income taxes 12% 0% FICA Social Security taxes* 4% 4% FICA Medicare taxes 2% 2% Company health insurance 4% 4% * these are not the actual required percentages

d. The estimated year-end audit fees are: $90,000

e. Rent revenue consists of 13 equal monthly payments, including one paid in advance for January 2020.

f. A trade account payable was converted to a note payable during the year. No entry has been made to record this. The note payable is due at the end of 2020. The amount of the note payable is: $40,000 The annual interest rate on the note payable is: 3% The note payable was created at the end of this month: 9 (January = 1; December = 12)

g. A lawsuit was commenced against the company in 2019. Damages claimed are: $30,000 Lawyers for the company consider the likelihood of success to be: Possible

h. The interest rate on the mortgage is: 8% Annual payments (blended principal and interest) are made on Dec. 31 and total: $163,200 The 2019 payment has been recorded as Interest on Long-term Debt expense.

i. The corporate income tax rate as a percentage of income before income taxes is: 10% Corporate income tax installments during the year have been recorded as Income Tax expense in the records. Assume any 2019 loss before income taxes will result in the refund of income taxes at the current year's income tax rate.

Student Assign Ch 9 Recoeding babilities US Edition at Aug 29 18adx- LibreOffice Cak ft Yew Insert Fgrmat looks pata岦ndow 난elp Caibi Σ = Morgan Mandacturing Corp. Adjusting Entries For the Year Ended December 31, 2019 The following additional information is available at the corporation's year-end. GST of 5% only applies when indicated. a. A sale on account has not been recorded in the amount of:$5,000 Applicable sales tax is: 8% warranty expense for the yer as a percentage of sales should be: Unpaid gross salaries at year-end amount to: Deductions from unpaid salaries are as follows: b, 2% - - c. $10,000 Employee Company Portion Portion Employee income taxes FICA Social Security taxes FICA Medicare taxes Company health insurance 12% 4% 296 0% 4% 2% these are not the actual required percentages

Answer 1

Note; The Balances of Un-adjusted Trial Balance is not matching, hence financial statements cannot be prepared.

the required adjusting entries and their posting in adjusted trial balance is given below.

a	Reocord of sale on account of: $5,000
	Account	Debit	Credit
	Accounts Receivable	$                       5,400
	Sales		$                  5,000
	Sales Tax Payable		$                     400
	Sales Tax = (5000*8%)
b	Reocord of Warranty expense
	Account	Debit	Credit
	Warrenty Expenses	$                   271,100
	Estimated Warrenty Liability		$             271,100
	Calculation :
	Total Sales for the year after making adjustment in point a	$             13,605,000
	Provision for warrenty expenses for the year @2%	$                   272,100
	Less: warrenty expenses already booked	$                       1,000
	Balance to be booked	$                  271,100
c	Reocord of Unpaid Gross salary
	Account	Debit	Credit
	Salaries Expense	$                     10,000
	FICA Soc.Sec Expenses	$                          400
	FICA medicare Expenses	$                          200
	Co. Health Insurance Expenses	$                          400
	Employees Income Tax Payable		$                  1,200
	FICA Soc.Sec payable		$                     800
	FICA medicare payable		$                     400
	Co. Health Insurance Payable		$                     800
	Salaries Payable		$                  7,800
d	Provision for Audit Fees Payable
	Account	Debit	Credit
	Audit Fees	$                     90,000
	Audit Fees payable		$                90,000
e	Transfer of excess rent revenue to unearned revenue account
	Account	Debit	Credit
	Rent Revenue	$                     40,000
	Unearned Rent Revenue		$                40,000
	Calculation: 520000/13*1
f	Conversion of Account payable to Neotes and interest accrued there on
	Account	Debit	Credit
	Trade Account Payable	$                     40,000
	Interest and Bank Charges	$                          300
	Note Payable		$                40,000
	Interest payable		$                     300
	Interest will be calculated for 3 months - for month 10, 11 and 12 @ 3% per annum
	Calculation: (40000*3%)/12*3
g	Provisions against law suit expenses
	Account	Debit	Credit
	Law Suit Damage Expense	$                 30,000
	Provision for Law Suit Damage Expense		$            30,000
h	interest rate on the mortgage to be Booked in P&L and blance to be transferred to Long term Debt Account
	Account	Debit	Credit
	Mortgage Payable	151,111
	Interest on Long-term debt		151,111
	Calculation
	Mortgage blended principal and interest of 8%	$                   163,200
	Interest Portion on Above (163200/108*8)	$                     12,089
	Actual Interest Expenses Booked	$                   163,200
	Reversal To be made	$                   151,111
i	Rectification of Income tax Expenses
	Account	Debit	Credit
	Corp Income Tax Receivable	$                   489,600
	Corp. Income tax expenses		$             489,600

Un Adjusted Trial Balarnce Adiustments Adjusted Trial Balance Account 74,000 760,000 210,000 74,000 765,400 210,000 489,600 $10,000,000 $7.900,000 Cash & bank Accounts Receivable Parts inventory ncome l ax $ 489,600 Land $10,000,000 $7.900,000 ing Accumulated Depreciation Building Trade Account Payable Interest payable Estimated Warrenty Liability $% Salaries Payable Employees Income lax Fayable FICA Soc. Sec payable FICA medicare payable Lo. Health Insurance Fayable Lorp Income lax Fayable Dales lax Fayable $1,580,000 140,000 $1,580,000 100,000 300 135,100 $40,000 300 $271100 136,000 1.200 1.200 1,000 $40,000 $40,000 Unearned Rent Revenue Mortgage Payable Common Stock Retianed Earnings Rent Revenue $1,632,000 $ 9,000,000 $2,963,800 520,000 $13,600,000 40,000 40,000 1,480.889 $9,000,000 $2963800 480,000 $13,605,000 $40,000 870,400 870,400 Cost of Goods Sold Bad Debt Expenses Co. Health Insurance Expenses $ Delivery Expenses Depreciation expenses Buildin $ FICA Soc. Sec Expenses FILA medicare Expenses Interest and Bank Charges Interest on Long-term Law Suit Damage Expense Dffice Soupplise Expenses Professional Fees Salaries Expense Warrenty expenses Corp. Income tax expenses %489,600 Audit Fee Expenses Audit Fee Expenses Payble Provision for Law Suit Damage Expense 18,800 300,000 300,000 18,800 9,200 50,000 163,200 200 300 50,300 12,089 30,000 99,000 40,000 470,000 272,100 debt $30,000 99,000 40,000 460,000 $10,000 $489,600 $ 90,000 30,000 $90,000 90,000 90,000 30,000 21.723,889 $ 29.557489 7.833,600 Total $ 21,603,200 $ 29.436,800 $ 7.833,600 $ 1,128.511$1,128.511 Difference