You have been contacted by Allied Corporation to assist them with the closeout of their year-end. Their family accountant of 35 years decided that he wanted to start retirement a little early this year. You are inheriting a set of books that needs to be closed out for the year. Here is what we know: • This is the first year of business for Allied Corporation and with the assistance of the family accountant; journal entries to adjust the books have been prepared - with a few mistakes. • The presently enacted tax rate is 30% and is scheduled to change to 35% in 2016. • All tax related entries that have been made should be reviewed for accuracy and corrections should be made to the client's books. • Bad debt expense should be recorded as a percentage of sales. Record this at 1% of sales using the income statement approach and make this adjusting journal entry. Cash sales for the year total $1,380. • Depreciation expense is missing. Use straight line over 4 years assuming no salvage value and make this adjusting journal entry. • Make any additional journal entries that you deem necessary to make Complete the above and create the necessary journal entries to fix any issues that you uncover and close out the books.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

You have been contacted by Allied Corporation to assist them with the closeout of their year-end. Their family accountant of 35 years decided that he wanted to start retirement a little early this year. You are inheriting a set of books that needs to be closed out for the year. Here is what we know:

• This is the first year of business for Allied Corporation and with the assistance of the family accountant; journal entries to adjust the books have been prepared - with a few mistakes.

• The presently enacted tax rate is 30% and is scheduled to change to 35% in 2016.

• All tax related entries that have been made should be reviewed for accuracy and corrections should be made to the client's books.

• Bad debt expense should be recorded as a percentage of sales. Record this at 1% of sales using the income statement approach and make this adjusting journal entry. Cash sales for the year total $1,380.

• Depreciation expense is missing. Use straight line over 4 years assuming no salvage value and make this adjusting journal entry.

• Make any additional journal entries that you deem necessary to make

Complete the above and create the necessary journal entries to fix any issues that you uncover and close out the books.

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