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

Adjustment Entries

1.

Advance Sales A/c Dr 46800

To Sales A/c 46800

2.

Profit & Loss A/c Dr 42012

To Estimated Warrenty Liability 42012

3.

Interest on Note Payable A/c Dr 1680

To Notes Payable 1680

4.

Interest on morgage A/c Dr 9305

To Morgage A/c 9305

5.

Uncollectable A/cs Written off Dr 826

To Account Receivable 826

6.

Inventory Written off A/c Dr 10000

To Inventry A/c 10000

7.

Income Tax Expences A/c Dr 5530

To Cash A/c 5530

Income form operation calculation for the period ended 31-12-2017 for the golden wedding dress company

Net adjusted sales (1363000+46800-9400) 1400400

Less : Expences

Income Tax Expences 66420

Operating Expences 1179000

Accrued Interest on

Notes Payable 1680

Interest on morgage

Payable 9305

Uncollectible A/cs W/off 826

Inventry Written off 10000

Total Expences 133169

Provision made

for warrenty 42012

Profit transferred

to capital A/c 91157

GOLDEN WEDDING DRESS COMPANY

BALANCE SHEET

DECEMBER 31 2017

CURRENT ASSETS

Account Receievable 81774

Inventory 63400

Cash 83370

Total Current Assets 228544

Property Plant & Equipments

Land 139000

Building 451000

Euipments 655000

Total Property, Plants & Equipments 1245000

Total Assets $1473544

Liabilities

Current Liabilities

Advances Sales 187200

Estimated Warrenty Liability 47012

Allowance for Doubtful Accounts 600

Total Current Liabilities 234812

Non Current Liabilities

Accumulated Depreciation on Building 134000

Accumulated Depreciation on Equipments 350000

Notes Payable 169680

Morgage Payable 241930

Total Non Current Liabilities 895610

Equity (251965+91157) 343122

Total Liabilities & Equity $1473544

So above is the solution

Notes & Workings

1. All the figures are stated in USD ($)   

2. Adjusted Net Sales = 1363000+46800-9400 1400400

3. Closing cash Balance = 88900-5530 83370

4. Closing A/c Receivable 82600-826 =81774

5. Closing Inventry = 72400-10000 = 63400

6. Estimated Warrenty Liability = 5000+42012 =47012

7. Morgage Balance = 232625+9305 = 241930