Problem 9 - Correction of Error related to PPE The Delivery Equipment account of FREEDOM COMPANY showed the following details for 2016: Dellvery Equlpment P1,500,000 08.30.06 5,000 10.31.06 01.01.06Balance P225,000 01.15.06 180,000 09.30.06 535,000 Your examination disclosed the following: a. The P5,000 charged to the Delivery Equipment account on January 15, 2006 represents payment of LTO registration fees for the company's delivery equipment for the year 2006. b. The company bought a second-hand delivery truck on Sept. 30, 2006 for P535,000, which includes P35,000 worth of comprehensive insurance for one year effective October 1, 2006. c. The company wrote-off a fully depreciated truck with an original cost of P225,000 on August 30; further verification disclosed that this truck is still being used by the company. d. The credit P180,000 on October 31, 2006 represents proceeds from the sale of one truck costing P350,00, which is 50% depreciated as of December 31, 2005. e. There is only entry to made the Accumulated Depreciation account during 2006, a debit for P225,000 on August 30,2006. f. There is no other delivery equipment that is fully depreciated. 8. The company uses the straight-line method of depreciating their delivery equipment over a useful life of 5 years. A full year depreciation is given in the year of acquisition and none in the year of disposal.
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
Requirement:
a. Give all the necessary entries to correct the account on December 31, 2022. Write your entries
in a columnar paper.
b. Using a T-Account, show the corrected balance of the delivery equipment by posting your
adjusting entries.
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