Question

Golden Wedding Dress Company designs custom wedding dresses for brides to be. The person preparing the adjusting entries at year-end was unable to complete the adjustments due to illness. You have been given the following unadjusted trial balance along with some additional information for the December 31, 2017, year-end.

Account	Unadjusted Balance
Accounts receivable	$	82,600
Accum. deprec., building		134,000
Accum. deprec., equipment		350,000
Advance sales		234,000
Allowance for doubtful accounts		600
Building		451,000
Cash		88,900
Equipment		655,000
Estimated warranty liability		5,000
Income tax expense		60,890
Land		139,000
Merchandise inventory		73,400
Mortgage payable		232,625
Sarah Golden, capital		251,965
Note payable		168,000
Other operating expenses		1,179,000
Sales		1,363,000
Sales returns and allowances		9,400

Other information:
1. Assume all accounts have a normal balance.
2. 80% of the balance in the Advance Sales account is for wedding dresses to be made and delivered by Golden during 2018; the remaining 20% is from sales earned during 2017.
3. Golden warranties its wedding dresses against defects and estimates its warranty liability to be 3% of adjusted net sales.
4. The 4%, 5-year note payable was issued on October 1, 2017; interest is payable annually each September 30.
5. A partial amortization schedule for the mortgage follows:

Year	Interest Expense			Principal Portion			Annual Payment*			Principal Balance at Dec. 31
2015	$	12,066		$	22,113		$	34,179		$	279,540
2016		11,182			22,997			34,179			256,543
2017		10,262			23,917			34,179			232,625
2018		9,305			24,874			34,179			207,751
2019		8,310			25,869			34,179			181,883

*Payments are made annually each January 2.

6. Uncollectible accounts are estimated to be 1% of outstanding receivables.
7. A physical count of the inventory showed a balance actually on hand of $63,400.
8. The balance in Income Tax Expense represents taxes accrued and paid for the 2017 year at the rate of $5,535 per month. Assume the income tax rate is 40%.

Required:
1. Based on the information provided, journalize the adjusting entries at December 31, 2017. (Round the final answers to 2 decimal places.)

1.Record to adjust for earned sales.

2.Record the estimated warranty liability.

3.Record the accrual of interest expense on the note payable.

4.Record the accrual of interest on mortgage payable.

5.Record to adjust for estimated uncollectible accounts.

6.Record to adjust for shrinkage.

7.Record the adjustment for income taxes owing.

2. Prepare a classified balance sheet. (Be sure to list the assets and liabilities in order of their liquidity.Round the final answers to the nearest whole dollar amount.)

	GOLDEN WEDDING DRESS COMPANY Balance Sheet December 31, 2017 Assets Current assets: Total current assets Property, plant and equipment: Total property, plant and equipment Total assets Liabilities Current liabilities: Total current liabilities Non-current liabilities: Total liabilities Equity Total liabilities and equity

Answer 1

1	Advance Sales Dr				46,800
	To Sales					46,800
	(To record adjustment for earned sales)
	Adjustment amount =234000*20%
2	Warranty Expense				37,012
	To Estimated Warranty Liability					37,012
	(To record estimated warranty liability)
	Sales from Unadjusted TB				1,363,000
	Less: Sales returns				9,400
	Add: Additional sales from entry 1				46,800
	Adjusted Net Sales				1,400,400
	Warranty liability - 3% of Adjuste net sales				42,012
	Existing warranty liability				5,000
	Additional provision required				37,012
3	Interest expense				1,680
	To Accrued Interest					1,680
	(To accrue interest on 4%, 5-Year note payable for the three months October, November and December)
	Interest expense = 168000*4%*3/12
4	Interest expense				9,254
	To Accrued Interest					9,254
	Interest expense = 9305*363/365
5	Bad and Doubtful debts expenses A/c Dr				226
	To Allowance for doubtful debts					226
	Accounts receivable				82,600
	Provision - 1% of A/R				826
	Existing provision				600
	Additional provision required (826-600)				226
6	Loss due to Shrinkage				10,000
	To Merchandise Inventory					10,000
	(To record loss due to shrinkage)
	Inventory in books				73,400
	Less: Physical Inventory				63,400
	Loss				10,000
7	Income tax expense a/c Dr				4,401
	To Income tax liability					4,401
	(To record income tax payable)
	Sales				1,363,000
	Less: Returns and allowances				9,400
	Add: Adjustment				46,800
	Net Sales				1,400,400
	Other operating expenses				1,179,000
	Warranty expense				37,012
	Interest expense				10,934
	Bad and doubtful debts expense				226
	Loss due to Shrinkage				10,000
	Total expenses				1,237,172
	Net Income				163,228
	Income tax @40%				65,291
	Income tax paid				60,890
	Income tax payable				4,401

GOLDEN WEDDING DRESS COMPANY
Balance Sheet
31-Dec-17
Assets
Current assets:
Cash			88,900
Merchandise Inventory			63,400
Accounts Receivable		82600
Less: Allowance for Doubtful Accounts		826
Net Accounts Receivable			81,774
Total current assets			234,074
Property, plant and equipment:
Land			139,000
Building		451000
Less: Accumulated Depreciation - Building		134000
Building			317,000
Equipment		655000
Less: Accumulated Depreciation - Building		350000
Equipment			305,000
Total property, plant and equipment			761,000
Total assets			995,074
Liabilities
Current liabilities:
Advance Sales			187,200
Estimate Warranty Liability			42,012
Accrued Interest			10,934
Income tax payable			4,401
Total current liabilities			244,547
Non-current liabilities:
Mortgage Payable			232,625
Note Payable			168,000
Total Non current Liabilities			400,625
Total liabilities			645,172
Equity
Sarah Golden, Capital			251,965
Net Income			97,937
Total Equity			349,902
Total liabilities and equity			995,074