[jozo]

TRIAL BALANCE June 30 2011
Debit Side: Cash 15000 A/c receivable 28000 opening inventory 32000 building 300000 machinery 140000 purchases 275000 salaries 95000 operating expense 35000 administrative expense 28000

Credit Side: share capital 300000 retained earning 39000 a/c payable 18000 long term loan 100000 sales ravenue 485000 security deposit for sale 6000

Other Data :
1. depreciation on building and machinery was $15000 &$ 14000 respectively deprecation is charged on reducing balance method.
2.interest on long term loan is 10% per annum.
3. income tax paid is $5000 for the year
4. closing stock at June 30,2011 was $38000

Required: profit loss account and balance sheet

[teacherjenn4]

If you're in Grad school, this should be your assignment to complete. Post your answer and someone will come along and review it.

[jozo]

If you're in Grad school, this should be your assignment to complete. Post your answer and someone will come along and review it.

I am facing problem in preparing of balance sheet and income statement , I am confuse in opening inventory and closing stock where it appear in balance sheet or income statement and also also confuse in adjustment of tax and interest so kindly assist me how I adjust these items ?
opening inventory.. + purchase - closing stock = cgs?

[pready]

Inventory is a current asset and will appear on a balance sheet.

Stock is an equity account and will appear on a balance sheet.

Note these two accounts are separate items.

Inventory is merchandise that is sold in the normal course of a business like shirts, cookware, watches, etc.

Stock is ownership in a company.

You do not have enough information to calculate Cost Of Goods Sold because the amount is not given and there is no information about ending inventory. If you have ending inventory you could calculate COGS by adding beginning inventory and purchases, then subtracting ending inventory.

For interest you have to calculate the amount of interest for 6 months owed on the loan. So take your loan amount times 10% times 6/12 to get 6 months of interest. Your adjusting entry will be to Interest Expense and Interest Payable.

For income taxes you have to calculate 6 months of income taxes. So take the yearly amount and divide it by 2 or times 6/12 to get 6 months worth of income taxes. Your adjusting entry will be to Income Tax Expense and Income Taxes Payable.

Note: Adjusting entries will affect one balance sheet account and one income statement account.