1.Physical count of inventory on Dec31,2006 indicated that the company had 480000$of inventory on hand. 2.An aging of accounts receivable indicates that$75,000 is uncollectible
3.The company uses straight-line depriciation.The assets have a ten year life and zero salvage value.
4.The company used a third of the remaining insurance policy during 2006
5.The company pays interest for its bond payable on Dec 31 of every year.The coupon rate and the effective rate are both 10%per year
6.the company's tax rate is 35%.All income tax charges are recorded at the end of the year.
7. $200,000 shares of common stock were outstanding during 2006. a.Prepare AJE b.closing entries on Dec31,2006. c.Income statement including Earnings per share dsclosure d.statement of Retained Earnings. e.what are the measures of income included on the statement? I tried working on this problem . But I am confused whether I am doing the AJE and closing entries right or not.Please help me. Adjusting Journal Entries: 1.Inventory(Ending) 480000 COGS 737000 Purchases 750000 Inventory(Beginning) 467000 2.Bad Debt Expense 25000 Allowance for Doubtful A/c 25000 (75000-50000) 3.Depreciation Expense 85000 Accumulated Depriciation 85000 (Should I be including Inventory and fixed assets here?) 4.Insurance Expense 20000 Prepaid Insurance 20000 (expense=1/3*60000) 5.Interest Expense 50000 Interest Payable 50000 6. 7.No AJE 8.Income tax liability(35000*.35) 12250 Extra Loss 12250 9.Income tax liability 21000 . Loss of accounting principle 21000 Am I doing it correct?Please advise. Last edited by student07; Feb 15, 2007 at 06:20 PM. Search this Thread 5 Answers  CaptainForest Posts: 3,646, Reputation: 392 Ultra Member #2 Feb 15, 2007, 08:13 PM 1) Dr. Supplies Expense 737,000 Cr. Supplies 737,000 At the beginning of the year you had 467,000, plus the 750,000 of purchases, less what you have at then end of the year 480,000. 2) Dr. AFDA 75,000 Cr. AR 75,000 That leaves a debit balance of 25,000 in your AFDA though. So, Dr. Bad Debt Expense 25,000 Cr. AFDA 25,000 3) Fixed Assets 850,000 / 10 = 85,000 Only include Fixed Assets, NOT inventory Dr. Amortization Expense 85,000 Cr. Accumulated Amortization 85,000 4) Dr. Insurance Expense 20,000 Cr. Prepaid Insurance 20,000 60,000 x 1 / 3 = 20,000 5) Dr. Interest Expense 50,000 Cr. Cash 50,000 500,000 x .1 = 50,000 If they are to have paid it on Dec. 31, would it not be cash? Although assuming interest payable is fine as well. 6.the company's tax rate is 35%.All income tax charges are recorded at the end of the year. You have to calculate your company’s net income for the year. Then take 35 of that amount as tax. 7.$200,000 shares of common stock were outstanding during 2006.
That’s nice, really you only need this for when you calculate EPS.

Where did 8 and 9 come from?
 student07 Posts: 6, Reputation: 1 New Member #3 Feb 15, 2007, 09:59 PM
Thank you CaptainForest.
8 & 9 come from the columns of 1.extraordniary loss 2.Loss due to change in a/c ing principle.(Provided in the excel sheet columns above)
Shouldn't I be doing this?

For #6. I should be closing the entries first and then calculating net income?
I shall post my calculations for NI.Please verify.
 student07 Posts: 6, Reputation: 1 New Member #4 Feb 18, 2007, 04:26 PM
Am I making correct entries to the Income statement?
Attachment 2625
Originally Posted by student07

Thank you CaptainForest.
8 & 9 come from the columns of 1.extraordniary loss 2.Loss due to change in a/c ing principle.(Provided in the excel sheet columns above)
Shouldn't i be doing this?

For #6. I should be closing the entries first and then calculating net income?
I shall post my calculations for NI.Please verify.
 CaptainForest Posts: 3,646, Reputation: 392 Ultra Member #5 Feb 18, 2007, 05:05 PM
Looks like a correct Income Statement, except that you forgot to add Bad Debt Expense of 25,000
 student07 Posts: 6, Reputation: 1 New Member #6 Feb 18, 2007, 05:37 PM
S now my income is 0! Des it happen that way?
Attachment 2628
Originally Posted by CaptainForest
Looks like a correct Income Statement, except that you forgot to add Bad Debt Expense of 25,000

I am preparing adjusting entries for dec 31 1) on nov 1, jay borrowed $9,000 from yorkville bank issuing a 90 day, 10% note. 2) on dec 1, jay gave laura palmer a 60 day, 12% note for$6000 on account. I wrote: cash 9,000 n/p 9,000 2) a/r ...
I attempted to do this problem & I am not sure whether it is correct or not.Please help. Question is as follows. Balance Sheet as of dec 31 2002 Assets Cash 24$A/c Rec. 15 Supplies 6 Prep. Insurance12 Equipment 50 Adjusting entry [ 1 Answers ] I'm trying to do my accounting homework and I got stumped. Im doing an adjusting entry for Interest accrued on notes reveivable on may 31st for 100$. Would I debit notes recievable and credit interest income?