(34 points) Lloyd Christmas, Ltd.'s accounting records reflect the following account
balances at January 1, 2023 (beginning of the year):
Account
Debit
Credit
Equipment
$160,000
Inventory
$ 95,000
Accounts Receivable
$ 20,000
Building
$120,000
Cash
$ 150,000
Supplies
$ 12,000
Prepaid Rent
$ 15,000
Land
$100,000
Unearned Revenues
$50,000
Accounts Payable
$60,000
Accumulated Depreciation -
$30,000
Equipment
Accumulated Depreciation - Bldg
$50,000
Note Payable
$140,000
Owners' Capital
$342,000
This company uses the perpetual inventory system (therefore, the company records a decrease to
inventory and COGS expense for every sale). There were no owner investments or owner
withdrawals for the year. Make the following adjustments for the year ended December 31,
2023:
Example: The company made a sale of services on credit. (see table below for entry)
1)
The Prepaid Rent for Lloyd Christmas Ltd. was paid on December 31, 2022 (the journal
entry for the initial prepayment has already been made). The lease was for three years.
Make the adjustment for the expired rent at December 31, 2023 (for the whole year).
2)
The note payable was taken out last year. The note carries an annual interest rate of 7%.
Interest needs to be accrued for the entire year. The interest will be paid February 8th,
2024 (next year). Record the adjustment necessary at December 31, 2023.
3)
Employee salaries in the amount of $58,500 were incurred for the year. Of that amount,
$48,500 had been paid in cash, the remainder was still owed to employees at the end of
the year. Record the journal entry necessary at December 31, 2023 to account for both
the paid and unpaid portion of salaries (hint: you should use 3 accounts).
4)
At the end of the year, $7,750 of the supplies remained on hand. Record the adjustment
necessary at December 31, 2023.
5)
The company paid $21,000 on their accounts payable during the year. Record the entry.
6)
The company made sales of merchandise (inventory) to customers for a total $240,000.
The sales were made half on credit, and half in cash. The inventory sold had originally
cost the company $90,000 (hint #1: this is your cost of goods sold expense). (hint #2:
you should use 5 accounts to record entry).
7)
The company provided the services associated with the Unearned Revenues balance at
the beginning of the year. Record the adjustment necessary for the year 2023.
8)
At December 31, the company had earned $41,000 in tax consulting revenue, but had not
yet received payment from their customer. Record the adjustment necessary at December
31, 2023. (use service revenue)
9)
On December 31, received $25,000 in cash representing advance payment for services to
be provided in February of 2024. Record the journal entry necessary on December 31,
2023.
10)
The building has a useful life of 30 years and no salvage value. The equipment has a
useful of 10 years and has a $30,000 salvage value. Record the adjustments necessary at
December 31, 2023 (record the entire year's depreciation for both the building and
equipment).
11)
Taxes for the year totaled $36,000. The taxes will be paid next year. Record the
adjustment necessary at December 31, 2023.
12)
The owners withdrew $5,000 for personal use on December 31, 2023. Record the
owners' withdrawal.
