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.
So far I have,
a. No adjustment entry required for supplies in hand account, but at the year-end supplies expenses must be recognized. When we recognize supplies expenses, than the $380 supplies on hand will reflect as current asset.
b. No adjustment required.
c. Since the insurance premiums are paid for the year, at the year end insurance expenses for that period needs to be recognized and remaining prepaid insurance will be shown on balance sheet.
Debit: Insurance Expenses $289
Credit: Prepaid Insurance $289 (315/12*11)
d. Debit: Depreciation- Expenses $4,950
Credit: Accumulated Depreciation – Equipment $4,950
e. Debit: Wages Expenses $440
Credit: Accrued Wages $440
f. Debit: Accounts Receivable $1,000
Credit: Service Revenue $1,000
g. No adjustment entry required
h. No adjustment entry required
And I need help with setting up the Trial Balance.
To set up the Trial Balance, you will need to gather the account balances for each account as of December 31, 2013. The Trial Balance is a list of all the accounts and their respective balances, organized under the appropriate debit or credit column.
Here are the accounts and their respective balances based on the provided information:
Cash: $
Accounts Receivable: $
Supplies: $380
Prepaid Insurance: $
Equipment: $
Accumulated Depreciation – Equipment: $
Investments: $
Accounts Payable: $
Salaries Payable: $
Unearned Revenue: $
Common Stock: $
Retained Earnings: $
Service Revenue: $
Wages Expenses: $
Depreciation Expense: $
Insurance Expense: $
Supplies Expense: $
Miscellaneous Expense: $
Interest Income: $
Interest Expense: $
You will insert the respective balances for each account into the Trial Balance, listing them under the appropriate debit or credit column. Each account should have a balance assigned to it, even if it is a zero balance.
Once you have completed setting up the Trial Balance, you can proceed with the next steps of the requirements, such as determining the adjusting journal entries, preparing the Income Statement and Balance Sheet, and identifying Book/Tax differences.