[kaherbers]

I have a question I obviously did something wrong my net income after taxes should be $8,960 I don't know what I did wrong PLEASE HELP

here are the adjusting journal entries

1. Ending inventory is 90,610

2.The allowance for doubful accounts is to be increased to a balance of $3,500

3. The building depreciated on a straight-line basis based on 20-year useful life. (no salvage value recorded)

4.Accrued salaries payable are $4,050

5. Supplies on hand are $780

6. Prepaid Insurance should be $860

7. Unearned sales revenue should have a balance of$800

8. Accrued real estate taxes are$700

9. Accrued interest on the mortgage is $160

10. Income tax expense is estimated to be $3,850.

Attached is my worksheet so far do I have something in the wrong column or do an adjustment wrong. Thanks!

[morgaine300]

1. Ending inventory is 90,610

This entry is missing altogether. Apparently you're doing periodic method. There's an adjustment for this method that credits out the old inventory balance and debits in the new inventory balance. The other side of those entries will be Income Summary, or your book may use a different account. (Carry the income summary to the income statement.)

You have instead just plopped the ending inventory balance into both the income statement and balance sheet. That isn't an entry. And the ending balance can't be on the income statement. The difference in the beginning & ending balances, combined with the net purchase cost, will create cost of goods sold. That's a little weird to understand, but you need the difference in the balances from making the above entry on your income statement, not the ending balance.

2.The allowance for doubful accounts is to be increased to a balance of $3,500

It says to be increased to a balance of $3500, not increased by $3500.

9. Accrued interest on the mortgage is $160

An accrued expense is one that has been incurred but not yet paid. That means you must recognize the expense and then put it into a payable since it hasn't been paid. (Exactly like your income tax entry.) Instead of putting it into the expense, you have taken it out of it. And you've taken it out of a payable instead of putting it into. That is, it's backwards. Also, interest payable should be separated from the mortgage. The mortgage is at its current principal balance and does not include any interest.

You also need to learn what order the accounts go in. You've got revenue mixed with expense. Sales Returns & Sales Discounts should be right under Sales. (They will net out of gross sales to get net sales. Essentially they are in the order they will be on the statements.) You should have Purchases, Purchase Discounts and Freight In all together. Those will go together to make the net purchase cost. Dividends declared is a contra equity account and you've got it with expenses. It would also be good to keep the selling expenses together and the general expenses together. And technically, interest revenue and interest expense go at the very end because those are "other," though I don't know if you've learned that yet. (If you're doing a multi-step income statement, you should have learned that.)

Since the initial accounts should be in order, all the balance sheet accounts would be first, followed by the income statement accounts. You won't have a lone income statement account in the top section with the assets... you've stuck inventory onto the income statement for unknown reasons.

You have also not been careful about bringing the balances over to the statement columns in their correct dr/cr sides. And you've missed carrying over at least one balance. And unearned sales revenue is a liability. "Unearned" means it's been paid to you in advance but you haven't earned it yet (haven't delivered the goods), so you owe the goods - liability.

And as long as you have a spreadsheet, why not take advantage of being able to insert lines to get the added accounts at the bottom in their correct places?

[morgaine300]

Oh, I get what you're doing with inventory. The idea works, but wrong places. The number up at the top, with the assets, can't be in the income statement columns. That should be on the balance sheet at its ending balance. Don't turn an asset into an income statement account.

If you're doing to list both beginning and ending balances in the income statement part, do it elsewhere, down with the expenses, because that's what it's going to affect in the long run. Mathematically, it doesn't matter if you list beginning & ending balances, or if you just list the difference like I described. Just make sure that either way, it's with the income statement and not the balance sheet.

[morgaine300]

Oh, I get what you're doing with inventory. The idea works, but wrong places. The number up at the top, with the assets, can't be in the income statement columns. That should be on the balance sheet at its ending balance. Don't turn an asset into an income statement account.

If you're doing to list both beginning and ending balances in the income statement part, do it elsewhere, down with the expenses, because that's what it's going to affect in the long run. Mathematically, it doesn't matter if you list beginning & ending balances, or if you just list the difference like I described. Just make sure that either way, it's with the income statement and not the balance sheet. (I don't think that's what is throwing off you net income, but it should be done properly and make sense.)

Overall, it's a couple of minor things on the entries, and the rest mostly classifying things wrong (which will affect that income statement), or missing copying a number, etc.