Case Study -Adjusting and closing entries and Preparing Statements The following trial balance was taken from the books of Fisk Corporation on December 31, 2022. At year end, the following items have not yet been recorded. a. Insurance expired during the year, ∈2,000 . b. Estimated bad debts, €2,600 . c. Depreciation on equipment, 10% per year. d. Interest at 5% is receivable on the note for one full year. e. Services provided but not yet billed, 65,400 . f. Accrued salaries and wages at December 31,€5,800 . Instructions (a) Prepare the necessary adjusting entries. (b) Prepare the necessary closing entries. (C) Prepare Income Statement. (d) Prepare Statement of Owner’s equity. (e) Prepare Classified Balance Sheet.

Business, Accounting

29 0

X
Choose your mode of payment

Get full Expert solution in seconds

$1.97 ONLY

Unlock Answer

EXPERT ANSWER

a) adjusting Entries

DateAccountDrCr
2022-12-31Insurance Expense$2,000
Prepaid Insurance$2,000
DateAccountDrCr
2022-12-31Bad Debts$2,600
aallowance for doubtful debts$2,600
Being Bad Debts provision created
DateAccountDrCr
2022-12-31Depreciation Expense$10,500
Accumulated Depreciation – Equipment$10,500
being depreciation provided on equipment
DateAccountDrCr
2022-12-31Note Receivable$350
Interest Income, Other$350
DateAccountDrCr
2022-12-31Accounts Receivable$5,400
sales revenue$5,400
DateAccountDrCr
2022-12-31Salaries & Wages Expense$5,800
Salaries & Wages Payable$5,800

b) Closing Entries

DateAccountDrCr
2022-12-31profit and loss A/c$2,000
Insurance Expense$2,000
DateAccountDrCr
2022-12-31profit and Loss A/c$2,600
Bad Debts A/c$2,600
DateAccountDrCr
2022-12-31Profit and Loss A/c$10,200
Depreciation Expense$10,200
DateAccountDrCr
2022-12-31Interest Income, Other$350
Profit and Loss A/c$350
DateAccountDrCr
2022-12-31Sales Revnue$5,400
profit and Loss A/c$5,400
DateAccountDrCr
2022-12-31profit and loss a/c$5,800
Salaries & Wages Expense$5,800

c) Income Statement

Income Statement for the year ended 31st december 2022
ParticularsAmountAmount
Sales Revenue€265400
Interest Income€350
Toatl Income€265750
Less: Expenses
Cost of Goods Sold€111000
Salaries and Wages Expenses€55800
Rent Expenses€12800
Insurance Expenses€2000
Depreciation€10500
Bad Debts€2600
Total Expenses€194700
Net Profit€71050

d) Sataement of Owners equity

Sataement of Owners Equity
Share Capital€44,000
Opening Retained Earnings€ 55.000
Add: Current Year Profit€ 71,050
Total Ratained eranings at end€1,26,050
Total Owners Equity€1,70,050

e) Balance Sheet

ParticulrasAmountAmount
Assets
Non Current Asstes
a) Equipments€105000
Less : Accumulated Depreciation€25500€79500
b) Notes Receivable€7350
Current Assets
a) Cash€12000
b) Inventory€44000
C) Acounts Receivable€45400
Less : Allowance for Bad Debts€4400€41000
d) Prepaid Insurance€2800
Total Assets€186650
Equity and Liabilities
Owners Equity
a) Share Capital€44000
b) Retained Earnings€126050
Liabilities
Current Liablities
Accounts Payable€10800
Outstanding salaries and wages€5800
Total Euity and Liabilities€186650