Question

Prepare in journal entry form all adjusting and correcting journal entries based on the following information.  All...

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).

(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 1% amounted to $280,000.

(n) Czar 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 1.20. For the year ended December 31, 2018 there is a debit balance of $340,000 for Merchandise Inventory. Prior year inventory records show the following calculation for 2018:

                   140,000 X 1.0  =    140,000

                      80,000 X 1.05 =    84,000

(o) All office equipment was purchased January 1, 2017. Czar 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 $9,600. There is a debit balance of $260,000 for Office Equipment on the balance sheet for the year ended December 31, 2018.

(p) On January 1, 2018, Czar rented a portion of one store to Pellston Inc. The contract was for 15 months and Czar required all of the cash up front. The rent is being earned equally each month. This is the only item in which rent is being earned by the company. There is a credit balance of $60,000 for Rent Revenue on the balance sheet for the year ended December 31, 2018.

Homework Answers

Answer #1
Journal entries:
Date Accounts Titles Debit$ Credit$
31-Dec Sales Revenue 280000
Sales tax payable 280000
(being 1% sales tax amounted to $280000
made payable on Dec 31)
31-Dec Lifo reserve account 40000
Merchandise Inventory account 40000
(140000 (1.20-1) + 80000 (1.20 - 1.05) = 40000
31-Dec Depreciation expense 41600
Acc. Dep. - equipment 41600
(260000 - 260000*20%)*20% = 41600
31-Dec Rent Revenue 12000
Unearned rent revenue 12000
[60000 - (60000*12/15) = 12000 ]
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