Reference no: EM131562356

Problem 1 -

Below you will see an unadjusted trial balance run at month end followed by information needed to make adjusting entries.

Adjusting items and notes:

1. The company uses a calendar year.

2. Insurance was prepaid at the beginning of the year by paying $6,000 for a 12 month policy.

3. It is estimated that supplies on hand equal $2,000 at month end.

4. The rent is prepaid quarterly and $7,500 covered the first quarter of 2017.

5. Equipment was all purchased at one time and has a life of 10 years with no salvage value.  The equipment was 40 months old at the end of October.

6. At month end sales commissions of $3,000 were earned but unpaid.  The company records sales commission liability as a salary liability.

7. The interest rate on long term debt is 6% per year.  Interest will actually be paid at the end of each calendar quarter. (don't forget the current portion of debt)

8. It is estimated that electricity usage equaled $800 during January and the company expects to be billed in early February.  Bills for utilities are entered into accounts payable.

9. The inventory balance includes purchases made during January of $215,000.

10. The company has a long history of cost of goods sold and 70% is a reasonable estimate to use for monthly financial statements.

11. The company considers sales salaries, commissions, supplies, and advertising to be selling expense and all other expenses to be administrative.

Do the following requirements below.  Create proper headings for each statement.

1. Record adjusting journal entries from information above.  You will need to calculate cost of goods sold to adjust inventory.  Draw T-accounts on your draft to help figure this out.

2. Prepare an adjusted trial balance including the adjusting entries made

3. Prepare a multi-step income statement.  Consider depreciation to be a selling and administrative expense.  Include a detailed cost of goods sold section including purchases and goods available for sale.

4. Prepare a statement of retained earnings

5. Prepare a classified balance sheet

6. Prepare closing journal entries including an entry to adjust the inventory balance.  Prepare entries to income summary and retained earnings even though this is a month end only.

Problem 2 -

Compute the ending inventory using LIFO for both the  periodic and the perpetual methods below:

Attachment:- Assignment.rar