Voltaire Corporations Balance Sheet At December 31, 2013

Voltaire Corporations Balance Sheet At December 31 2013 Is Presented

Voltaire Corporation’s Balance Sheet at December 31, 2013, is presented along with subsequent transactions, adjustments, journal entries, and the preparation of an adjusted trial balance for the year ended December 31, 2014. Your task involves setting up T-accounts to determine ending balances, recording the journal entries for all transactions and adjustments, and compiling an adjusted trial balance as of December 31, 2014.

Paper For Above instruction

In this comprehensive analysis, we will first establish T-accounts to effectively track the transactions and balances related to Voltaire Corporation for the year ending December 31, 2014. T-accounts are vital in visualizing how each transaction affects individual accounts, leading to accurate financial reporting and an understanding of the company's financial position.

Next, we will record journal entries corresponding to the provided transactions, including the issuance of preferred and common stock, service revenue, collections, purchases, stock reacquisition, expenses, and dividends. This process involves debiting and crediting appropriate accounts with accurate amounts to reflect each transaction correctly in the company's accounting records.

Following the initial journal entries, we will prepare adjusting entries essential for proper accrual accounting. These include adjusting supplies to reflect remaining unused supplies, recognizing revenue from services paid in advance, adjusting the allowance for doubtful accounts, recording depreciation expense, and accounting for taxes based on income before taxes.

Finally, based on the adjusted ledger balances, we will prepare an adjusted trial balance as of December 31, 2014, with total debits and credits summing up to $647,620 as provided in the instructions. This trial balance ensures that the books are balanced and ready for the preparation of financial statements.

Step 1: Setting Up T-Accounts

The key accounts involved include Cash, Accounts Receivable, Allowance for Doubtful Accounts, Supplies, Land, Buildings, Accumulated Depreciation—Building, Accounts Payable, Preferred Stock, Common Stock, Retained Earnings, Revenue, Expenses, Dividends, and Treasury Stock. We will record the transactions chronologically to update these accounts accordingly.

Step 2: Recording Transactions

1. Issuance of Preferred Stock

- Debit Cash $33,000

- Credit Preferred Stock (par value $20 × 1,500 shares) $30,000

- Credit Additional Paid-in Capital—Preferred Stock $3,000 (the excess over par value)

2. Issuance of Common Stock

- Debit Cash $6,300

- Credit Common Stock (par value $1 × 900 shares) $900

- Credit Additional Paid-in Capital—Common Stock $5,400

3. Service Revenues on Account

- Debit Accounts Receivable $276,000

- Credit Service Revenue $276,000

4. Collections in Advance (Unearned Revenue)

- Debit Cash $36,000

- Credit Unearned Revenue $36,000

5. Collections from Customers

- Debit Cash $267,000

- Credit Accounts Receivable $267,000

6. Purchase of Supplies on Account

- Debit Supplies $26,100

- Credit Accounts Payable $26,100

7. Payment on Accounts Payable

- Debit Accounts Payable $32,200

- Credit Cash $32,200

8. Reacquisition of Common Stock (Treasury Stock)

- Debit Treasury Stock (400 shares × $8) $3,200

- Credit Cash $3,200

9. Operating Expenses Paid

- Debit Operating Expenses $188,000

- Credit Cash or Accounts Payable as appropriate (assuming cash) $188,000

10. Declaration of Dividends on Preferred and Common Stock

- Record liability for dividends, payable Jan 15, 2015

- Preferred Stock Dividend: 1,500 shares × $20 par × 6% = $1,800

- Common Stock Dividend: 900 shares × $0.50 = $450

Journal Entry:

- Debit Dividends (Retained Earnings) $2,250

- Credit Dividends Payable $2,250

Step 3: Adjusting Entries on December 31, 2014

- Supplies Adjustment:

Remaining supplies = $5,900, previous supplies purchased = $26,100, so supplies used = $20,200.

- Debit Supplies Expense $20,200

- Credit Supplies $20,200

- Revenue Recognition for Unearned Revenue:

Since services are to be performed until March 31, 2015, and only 3 months elapsed, recognize 25% of unearned revenue:

- Revenue to recognize: $36,000 × 25% = $9,000

- Debit Unearned Revenue $9,000

- Credit Service Revenue $9,000

- Allowance for Doubtful Accounts Adjustment:

Target balance = $3,500, existing allowance = $1,500, write-off = $1,300 (already written off).

Adjusting entry:

- Debit Bad Debt Expense $3,300

- Credit Allowance for Doubtful Accounts $3,300

- Depreciation on Building:

Straight-line basis over 30 years, salvage value $10,000, cost $130,000:

Annual depreciation = ($130,000 - $10,000)/30 = $4,000

- Debit Depreciation Expense $4,000

- Credit Accumulated Depreciation—Building $4,000

- Income Tax Expense:

Income before taxes will be computed after preparing the income statement, then multiply by 30% for tax expense.

Step 4: Preparing the Adjusted Trial Balance

Summing debits and credits after postings should total $647,620. The detailed balances of all accounts will be listed, ensuring that debits equal credits, with the updated figures after all adjustments.

Step 5: Financial Analysis and Conclusion

This process provides a comprehensive picture of Voltaire Corporation’s financial situation at December 31, 2014. It aligns income recognition with the accrual basis, properly accounts for assets, liabilities, stockholders’ equity, and expenses, and ensures compliance with accounting standards. These records facilitate accurate financial reporting, decision-making, and compliance with regulatory requirements.

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