Journal Entries For Adventures Inc. Account Title Debit Cred

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The provided content contains various accounting entries, trial balances, financial statements, and closing entries for Trap Adventures Inc. The main task involves understanding and analyzing these financial documents to present a comprehensive overview of the company's financial position and performance for the period ending December 31, 2015. The core assignment requires preparing or evaluating journal entries, unadjusted and adjusted trial balances, income statement, statement of equity, balance sheet, and closing entries, culminating in a post-closing trial balance. The objective is to ensure accurate financial reporting through proper journalization, adjusting, closing, and verification processes, thereby demonstrating knowledge of basic accounting principles and practices.

Paper For Above instruction

In analyzing the financial reports of Trap Adventures Inc. for the fiscal year ending December 31, 2015, it is essential to understand the flow of transactions through the accounting cycle, from initial journal entries through to the preparation of financial statements. This comprehensive review will detail each step involved, discuss the implications of the entries, and evaluate the company's financial health based on the provided financial data.

Initial Journal Entries and Transactions

The initial journal entries recorded on December 1 depict various transactions including issuance of common stock, purchase of property, plant, and equipment, acquisition of prepaid expenses such as rent, supplies, and insurance, as well as operational transactions like collection of revenue and payment of expenses. For example, the entry recording the cash receipt of $60,000 from stock issuance increases cash while increasing equity through common stock. The purchase of equipment and prepaid expenses are capitalized or expensed accordingly, following standard accounting practices (Kieso, Weygandt, & Warfield, 2019).

The revenue and expense transactions during December reflect typical operations, with commissions earned increasing cash and revenue, and expenses such as salaries, utilities, repairs, and wages paid reducing cash and increasing respective expense accounts. These real-time entries lay the groundwork for subsequent adjustments needed at period-end to recognize accrued or deferred items properly.

Unadjusted Trial Balance

The unadjusted trial balance provides a preliminary view of the company's accounts before adjustments. It shows total debits and credits of $115,500, indicating a balanced ledger at that point. However, this trial balance does not include adjustments for accrued expenses or deferred revenues, which are necessary for accurate financial reporting (Palepu & Healy, 2013).

Adjusting Entries and Their Significance

On December 31, several adjusting entries are made: recognizing insurance expenses, rent expenses, depreciation, and accrued wages. Notably, insurance expenses of $300 and rent expenses of $3,000 reflect proper allocation of prepaid amounts to actual expenses incurred during the period. The depreciation expense of $325 accounts for depreciation on property, plant, and equipment, following straight-line depreciation principles. Wage accruals of $525 are reflected by increasing salaries and wages payable and wages expenses, aligning expenses with the applicable period (Glautier & Underdown, 2018). These adjustments ensure that the financial statements present an accurate depiction of the company's financial position and performance, in compliance with accrual accounting standards.

Post-Adjustment Financial Statements

The adjusted trial balance, reflecting all adjustments, shows total debits and credits of $116,350, maintaining balance. From this, the income statement indicates a net income of $25,275, consolidating revenues of $54,000 and expenses totaling $28,725. The presentation of net income highlights the company's operational profitability and serves as a basis for the statement of equity.

Statement of Equity and the Balance Sheet

The statement of equity records the initial investment of $60,000, plus net income, less dividends paid, resulting in retained earnings of $22,275. The cumulative effect of these transactions is reflected in the ending equity balance.

The balance sheet showcases total assets of $84,300, with current assets comprising cash, office supplies, prepaid rent, and prepaid insurance; non-current assets include property, plant, and equipment net of accumulated depreciation. Liabilities consist of accounts payable and salaries wages payable, totaling $2,025. Stockholders' equity accounts for common stock and retained earnings, collectively verifying that assets equal liabilities plus equity, adhering to fundamental accounting principles (Anthony, Hawkins, & Merchant, 2019).

Closing Entries and Post-Closing Trial Balance

The closing entries transfer revenues and expenses to income summary, which is then closed to retained earnings, as demonstrated by the journal entries made on December 31. Dividends are also closed, decreasing retained earnings. The post-closing trial balance confirms the remaining balances in the accounts after closing, with total debits and credits amounting to $84,625, components consistent with the closing process (Weygandt, Kieso, & Kimmel, 2018).

Analysis and Conclusion

Overall, the financial data reflects a profitable operation, with net income of over $25,000 and positive retained earnings. The company's assets exceed liabilities, and the equity structure suggests sound financial health. The meticulous process of adjusting, closing, and verifying accounts underscores the importance of accuracy in financial reporting. Ensuring adherence to accounting standards ensures stakeholders can trust the financial statements, guiding informed decisions (Penman, 2013).

References

  • Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate Accounting (16th ed.). Wiley.
  • Glautier, M., & Underdown, B. (2018). Accounting Theory and Practice. Routledge.
  • Palepu, K. G., & Healy, P. M. (2013). Business Analysis & Valuation: Using Financial Statements (5th ed.). Cengage Learning.
  • Anthony, R. N., Hawkins, D. F., & Merchant, K. A. (2019). Accounting: Texts and Cases (13th ed.). McGraw-Hill Education.
  • Weygandt, J. J., Kieso, D. E., & Kimmel, P. D. (2018). Financial Accounting (10th ed.). Wiley.
  • Penman, S. H. (2013). Financial Statement Analysis and Security Valuation (5th ed.). McGraw-Hill Education.
  • Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2019). Fundamentals of Corporate Finance. McGraw-Hill Education.
  • Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2019). Financial Accounting Theory and Analysis. Wiley.
  • Horngren, C. T., Sundem, G. L., Elliot, J. A., & Philbrick, D. R. (2018). Introduction to Financial Accounting. Pearson.
  • Robinson, T. R., & Henry, E. (2017). Accounting Principles: A Business Perspective. Cengage Learning.

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