The following unadjusted trial balance has been taken from the records of Mudryk Wholesalers Corp. at December 31, 2016:
The following additional information is available at the year-end. GST of 5% only applies when indicated.
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a. |
The company has sublet space in its leased facilities to another company for $1,000 per month since January 1. |
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b. |
A review of warranty claims indicates that the following amounts have been incorrectly recorded in income statement general ledger accounts: |
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Cost of goods sold |
$500 |
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Salaries expense |
$100 |
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c. |
A $4,000 purchase of parts inventory on account plus GST has not been recorded. |
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d. |
Warranty expense for the year is estimated at 1% of sales. |
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e. |
Unpaid gross salaries amount to $5,000. Deductions from gross pay are as follows: |
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Employee income taxes |
15% |
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Government employment insurance |
2% |
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Government pension |
5% |
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Company health insurance |
3% |
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The company matches employee contributions to the employment insurance, government pension, and company health insurance plans on a 1 to 1 basis. |
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f. |
Audit fees are estimated to be $8,000. |
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g. |
The corporate income tax rate is 25% of income before income taxes. Corporate income tax instalments during the year have been recorded as income taxes expense in the records. |
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Required:
- Prepare necessary adjusting entries at December 31, 2016. Include descriptions and general ledger account numbers, and calculations if necessary.
- Post the entries to the worksheet and prepare an adjusted trial balance.
- Prepare a classified income statement and statement of changes in equity for the year ended December 31, and a classified balance sheet at December 31. Consider salary, benefits, and warranty expenses to be selling expenses. No shares were issued during the year.
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