Question

M - After reviewing details of sales, you note that the sales taxes collected on the last week of December’s sales were included in sales revenue. Sales recorded the last week of December that included the sales tax of 2% amounted to $350,000.

N -Accounting Creations uses the Dollar Value LIFO inventory method. For internal purposes, the Merchandise Inventory Account is maintained at FIFO (current costs). At the end of the year, the LIFO reserve account is adjusted so inventory on the balance sheet reflects Dollar Value LIFO. You need to calculate the proper inventory balance and adjust the LIFO reserve. The price index for this year is 1.25. Prior year inventory records show the following calculation for 2018:

                   175,000 X 1.0 =    175,000

                  100,000 X 1.05 =   105,000

O - All office equipment was purchased January 1, 2017. Accounting Creations uses the DDB method to depreciate office equipment. No office equipment has been added since the initial purchase. It is estimated that the office equipment has a useful life of 10 years with a salvage value of $12,000.

Accounting Creations was authorized to issue 3,000,000 shares of $1 par Common Stock but has only issued 650,000 shares of common stock as of 12/31/2018. No new shares were issued during 2018.

1.         On the “Adjusting Journal Entries” worksheet, prepare in journal entry form all adjusting    and correcting journal entries based on the following information. All information was        provided to you as of 12/31/2018. (Round all numbers to the nearest dollar). Label            journal entries a through t.

Accounting Creations Incorporated
End of Period Worksheet
For the Year Ended December 31, 2018
	Unadjusted				Adjusted
Account Title	Trial Balance		Adjustments		Trial Balance
	DR	CR	DR	CR	DR	CR
Cash	330,000	-
Accounts Receivable	694,980	-
Allowance for Doubtful Accounts	-	17,000
Interest Receivable	-	-
Merchandise Inventory	425,000	-
Prepaid Insurance	-	-
LIFO Reserve	-	32,000
Prepaid Advertising	-	-
Prepaid Rent	17,000	-
Office Supplies	6,000	-
Note Receivable	25,000
Available for Sale Securities	375,000	-
Office Building	3,750,000	-
Accumulated Depreciation - Office Building	-	87,500
Storage Building	1,275,000	-
Accumulated Depreciation - Storage Building	-	-
Land	750,000	-
Leasehold Improvements	225,000	-
Accumulated Depreciation - Leasehold Improvements	-	-
Office Equipment	325,000	-
Accumulated Depreciation - Office Equipment	-	65,000
Patent	150,000	-
Accounts Payable	-	345,000
Sales Tax Payable	-	-
Salaries Payable	-	142,000
Payroll Taxes Payable	-	25,000
Interest Payable	-	-
Income Tax Payable	-	-
Unearned Rent Revenue	-	-
Loan Payable - Onstar Bank	-	650,000
Loan Payable - Coldstar Bank	-	2,000,000
Common Stock	-	650,000
Additional Paid in Capital	-	1,998,750
Retained Earnings	-	920,000
Accumulated Other Comprehensive Income	-	25,000
Dividends	84,750	-
Sales	-	4,528,200
Sales Returns and Allowances	42,250	-
Sales Discounts	19,250	-
Cost of Goods Sold	1,979,500	-
Sales Salaries Expense	436,400	-
Office Salaries Expense	274,000	-
Advertising Expense	16,000	-
Depreciation Expense - Office Building	-
Depreciation Expense - Leasehold Improvements	-	-
Depreciation Expense - Office Equipment	-	-
Leasing Expense - Stores	132,000	-
Miscellaneous Selling Expense	23,000	-
Research & Development Expense	15,000
Rent Expense - Storage Facility	-	-
Insurance Expense	15,000	-
Office Supplies Expense	35,000	-
Miscellaneous Administrative Expense	9,170	-
Rent Revenue	-	75,000
Interest Revenue on Note Receivable	-	-
Dividend Revenue on AFS Securities	-	25,000
Interest Expense	-	-
Bad Debt Expense	35,000	-
Amortization Expense	-	-
Income Tax Expense	-	-
Payroll Taxes Expense	121,150	-
	11,585,450	11,585,450

Answer 1