Andular Financial Services was organized on April 1 of the current year

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10. Adjusting Entries for Prepaid and Accrued Taxes
Andular Financial Services was organized on April 1 of the current year. On April 2, Andular prepaid $5,280 to the city for taxes (license fees) for the next 12 months and debited the prepaid taxes account. Andular is also required to pay in January an annual tax (on property) for the previous calendar year. The estimated amount of the property tax for the current year (April 1 to December 31) is $24,385.

a.  Journalize the two adjusting entries required to bring the accounts affected by the two taxes up to date as of December 31, the end of the current year.

 License fees 

 Property tax 

b.   What is the amount of tax expense for the current year?
$

11. Adjustment for Depreciation

The estimated amount of depreciation on equipment for the current year is $3,040. Journalize the adjusting entry to record the depreciation.

12. Determining Fixed Asset’s Book Value
The balance in the equipment account is $759,600, and the balance in the accumulated depreciation—equipment account is $235,500.
a.   What is the book value of the equipment?
$

SELECT OPTIONS:
Yes
No
b.   Does the balance in the accumulated depreciation account mean that the equipment’s loss of value is $235,500? 

SELECT OPTIONS:
Cost
Loss of value
, because depreciation is an allocation of the 
 of the equipment to the periods benefiting from its use.

13. Book Value of Fixed Assets
In a recent balance sheet, Macrohard, Inc. reported Property, Plant, and Equipment of $646,790 and Accumulated Depreciation of $375,100.
a.   What was the book value of the fixed assets? 
$

SELECT OPTIONS:
Yes
No

b.   Would the book values of Macrohard’s fixed assets normally approximate their fair market values? 

14. Effects of Errors on Financial Statements
For a recent period, the balance sheet for Save-A-Lot Corporation reported accrued expenses of $313,443. For the same period, Save-A-Lot reported income before income taxes of $101,869. Assume that the adjusting entry for the accrued expenses was not recorded at the end of the current period. What would have been the income (loss) before income taxes? 
SELECT OPTIONS:
Income before taxes
Loss before taxes $

 

 

 

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