Recording Daily And Adjusting Entries And Preparing And Ev

Recording Daily And Adjusting Entries And Preparing And Ev

Prepare journal entries for the transactions and adjustments of Jones Widget Company (JWC) for January 2015, including the issuance of bonds, purchase and sale of assets, customer transactions, payroll, stock transactions, and depreciation. Post all entries to T-accounts to complete the adjusted trial balance. Finally, prepare the January 2015 balance sheet and evaluate the effects of specific transactions on financial metrics such as bond carrying value, gain or loss on asset sale, stock transactions, and bond interest expense.

Paper For Above instruction

Jones Widget Company (JWC), incorporated at the beginning of 2014, has provided a comprehensive set of financial data and transaction records for January 2015. The task involves recording daily transactions and adjusting entries, preparing a complete period-end trial balance, and assembling the January 2015 balance sheet, along with analyzing specific financial impacts of the transactions.

Introduction

The financial operations of JWC during January 2015 encompass multiple activities, including refinancing via bonds, asset acquisitions, asset disposals, customer transactions, payroll functions, stock issuances and dividends, and depreciation. Proper recording of these events ensures accurate financial statements and compliance with accounting standards. The company's existing balances as of December 31, 2014, serve as starting points for journal entries and adjustments. Accurate recording following correct accounting principles is essential for reliable financial reporting and analysis.

Recording Transactions and Adjusting Entries

The initial step involves documenting all transactions in journal form. For instance, on January 2, JWC issued a bond with a face value of $91,000 at a 6% coupon rate but with effective yield at 7%, requiring premium amortization. The entry records the bond proceeds and the associated premium or discount based on present value factors. Simultaneously, the purchase of a truck for $10,500 is recorded as an asset under "Vehicles," and its expected mileage and no salvage value are noted for later depreciation calculations.

Payroll, including gross wages, taxes withholding, FICA taxes, and unemployment taxes, is recorded on January 16, aligning with pay periods and tax remittance schedules. Customer accounts are assessed to identify uncollectible amounts; a write-off of $900 is reversed in the journal for bad debt expense. Sales activities recorded include both inventory sales, with 175 units for January at $160 per unit plus 6% sales tax, and receivables collections. Inventory purchases of 75 units at $4,800 and other related expenses are also journalized.

Asset sales, such as the disposal of equipment purchased for $26,000 for $24,000, necessitate recording the sale and calculating gain or loss on disposal. The sale of vehicle assets and treasury stocks requires separate entries to reflect gains or losses appropriately. Bonds' interest expense recognition is critical to accurately report the cost of debt, incorporating amortization of premiums or discounts over the period.

On January 14, the company repays the principal plus accrued interest, and on January 20 and 27, treasury stocks are sold for gains or losses. The issuance of a 10% stock dividend on January 28 results in a stock dividend journal entry, expanding common stock and retained earnings accordingly. The date-specific adjustments include depreciation, assessing uncollectible accounts at 3%, expenses incurred for rent, and accrued payroll, including employer FICA taxes and unemployment taxes.

Post-Transaction Adjusting Entries

Adjustments made at period-end include depreciation expenses on the truck based on miles driven (2,000 miles in January) and the straight-line method for equipment, originally purchased mid-2014. Provisioning for uncollectible accounts, calculated at 3% of ending receivables, is journalized as an adjusting entry. Rent expense is accrued for the prepaid rent that relates to January. Payroll accrual for January 16-31 is recorded, including employer-side FICA taxes and unemployment contributions.

Interest expense on bonds is accrued based on the effective yield method, ensuring the amortization of premium or discount as appropriate. This comprehensive set of entries ensures the financial statements reflect the economic activities carried out during January 2015 accurately.

Postings and Trial Balance

All journal entries are posted to T-accounts, including cash, receivables, inventory, equipment, liabilities, and equity accounts. Zero balances are recorded accordingly, and a trial balance compiled reflects the adjusted balances after entries and adjustments. This step verifies the accounting equation's accuracy and prepares the data for financial statement preparation.

Preparation of Financial Statements

The balance sheet as of January 31, 2015, consolidates all adjusted account balances, presenting assets, liabilities, and equity. Items to be deducted, such as accumulated depreciation, treasury stock, and unearned revenue, are clearly indicated with negative amounts. The company's total assets, liabilities, and equity are tallied to ensure the statements balance.

The impact of transactions, such as bond issuance, asset sales, treasury stock transactions, and stock dividends, is analyzed to determine their effects on financial metrics. For example, the carrying value of bonds is examined before and after interest amortization, the gain or loss on asset sales is calculated, and the issuance of stock dividends affects retained earnings and common stock accounts.

Financial Analysis and Evaluation

The bond's carrying value at year-end is compared to its initial issuance to evaluate changes resulting from amortized premiums or discounts. The bond's annual interest expense considers the effective interest rate, adjusting for any amortization. Similarly, gains or losses on asset disposals help assess asset management effectiveness and impact net income.

The sale of treasury stock at a different price than its book value results in recognized gains or losses, which influence overall equity. Total compensation expense includes payroll, payroll taxes (FICA and unemployment), and other benefits, providing insights into labor cost management. The average issue price of common stock and total shares issued are calculated based on the transactions to evaluate stockholder equity changes.

In scenarios where a larger stock dividend was distributed (e.g., 40%), the journal entry would increase common stock and decrease retained earnings proportionally, reflecting increased dividend distribution. Finally, the future value of the company's investments in equipment, based on current funding and interest rates, is projected under various scenarios, aiding capital planning and investment decisions.

Conclusion

Accurately recording and adjusting entries for JWC ensures the integrity of financial statements, facilitating reliable reporting. Analyzing the effects of specific transactions reveals insights into asset management, debt handling, stockholder equity, and operational efficiency. Such comprehensive accounting practices are vital for informed decision-making by management, investors, and creditors, underscoring the importance of meticulous financial record-keeping and analysis.

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