1. CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 13-1 Work Sheet for a Corporation

2. CENTURY 21 ACCOUNTING © Thomson/South-Western Corporation Financial Statements  Corporations prepare 3 important financial statements at the end of each fiscal period:  Income statement  Statement of stockholders’ equity  Balance Sheet  The first step to preparing the financial statements is to prepare a worksheet.

3. CENTURY 21 ACCOUNTING © Thomson/South-Western Corporation Worksheet  Corporations prepare 3 important financial statements at the end of each fiscal period:  Income statement  Statement of stockholders’ equity  Balance Sheet

4. CENTURY 21 ACCOUNTING © Thomson/South-Western 4 LESSON 6-1 Work sheet A columnar accounting form used to summarize the general ledger information needed to prepare financial statements is called a work sheet. Accountants use a work sheet for 4 reasons: To summarize general ledger account balances to prove that debits equal credits To plan needed changes to general ledger accounts to bring account balances up to date To separate general ledger account balances according to the financial statements to be prepared To calculate the amount of net income or net loss for a fiscal period

5. CENTURY 21 ACCOUNTING © Thomson/South-Western Preparing a Trial Balance Worksheet 5 LESSON 13-1 1.Write the general ledger account titles. 2.Write the general ledger debit account balances. Write the general ledger credit account balances. 3.Rule a single line across the two Trial Balance columns. 4.Add both the Trial Balance Debit and Credit columns. 5.Write each column’s total below the single line. 6.Rule double lines across both Trial Balance columns.

6. CENTURY 21 ACCOUNTING © Thomson/South-Western 6 LESSON 6-2 Planning Adjusting Entries on a Work Sheet In order to give accurate information on financial statement, some general ledger accounts must be brought up to date at the end of a fiscal period. Adjustments are made in the adjustments column of the worksheet. Examples of accounts that might need to be adjusted at the end of a fiscal period: Prepaid Insurance Supplies Depreciation Organization Expense

7. CENTURY 21 ACCOUNTING © Thomson/South-Western 7 LESSON 13-1 ORGANIZATION EXPENSE ADJUSTMENT page 371 Corporate organization costs are intangible assets A common accounting practice is to write off intangible assets over a period of years (patents, copyrights, organizational costs) Recognizing a portion of an expense in each of several years is called amortization

8. CENTURY 21 ACCOUNTING © Thomson/South-Western 8 LESSON 13-1 ORGANIZATION EXPENSE ADJUSTMENT 1.Increase the expense. 2.Decrease the asset. 1 2 page 371 Lamplight incurred total organization costs of $2,400. LampLight spreads the costs over 5 years. Thus 1/5 of this amount, $480, is amortized in each of the first 5 years Organization Expense is debited for $480. Organization Costs is credited for $480.

9. CENTURY 21 ACCOUNTING © Thomson/South-Western 9 LESSON 13-1 FEDERAL INCOME TAX EXPENSE ADJUSTMENT 1.Increase the expense.2.Increase the liability. 1 2 page 371  At the beginning of the year, Lamplight estimated its federal income tax for the year to be $32,000.  LampLight paid the estimated tax to the federal government in four equal quarterly installments if $8,000 each  As of December 31, LampLight calculated its actual federal income tax to determine whether is owes additional income tax.  An adjustment Is planned on the worksheet for the additional amount owed.

10. CENTURY 21 ACCOUNTING © Thomson/South-Western 10 LESSON 13-1 CALCULATING FEDERAL INCOME TAX EXPENSE page 372 Calculating Net Income before Federal Income Tax Income Statement Credit Column Total Income Statement Debit Column Total before Federal Income Tax = Net Income before Federal Income Tax – $883,782.75$752,647.48=$131,135.27 – Complete the work sheet’s Adjustments columns except for the federal income tax expense adjustment. Do not total the Adjustments columns at this time Extend all amounts, except Federal Income Tax Expense, to the work sheet’s Income Statement columns Determine the worksheet’s Income Statement column totals using a calculator. Do not record the column totals on the worksheet. Calculate the difference between the two totals. The difference is the net income before federal income tax.

11. CENTURY 21 ACCOUNTING © Thomson/South-Western 11 LESSON 13-1 CALCULATING FEDERAL INCOME TAX EXPENSE page 372 Calculating Federal Income Tax Amount Net Income before Taxes Tax Rate= Federal Income Tax Amount  $ 50,000.0015%=$ 7,500.00  Plus 25,000.0025%= 6,250.00  Plus 25,000.0034%= 8,500.00  Plus 31,135.2739%= 12,142.76  $131,135.27$ 34,392.76  Calculate the amount of federal income tax using a tax rate table furnished by the IRS  15% of net income before taxes, zero to $50,000  25% of net income before taxes, $50,000 to $75,000  34% of net income before taxes, $75,000 to $100,000  39% of net income before taxes, $100,000 to $335,000  34% of net income before taxes over $335,000

12. CENTURY 21 ACCOUNTING © Thomson/South-Western 12 LESSON 13-1 CALCULATING FEDERAL INCOME TAX EXPENSE page 372 Calculating Accrued Federal Income Tax Expense Total Federal Income Tax Expense Estimated Federal Income Tax Already Paid = Accrued Federal Income Tax Expense – $34,392.76$32,000.00=$2,392.76 –  Calculate the amount of accrued federal income tax expense  Record the federal income tax expense adjustment on the worksheet

13. CENTURY 21 ACCOUNTING © Thomson/South-Western 13 LESSON 13-1 CORPORATE WORK SHEET page 374

14. CENTURY 21 ACCOUNTING © Thomson/South-Western 14 LESSON 13-1 CORPORATE WORK SHEET page 375  Extend the new balance of Federal Income Tax Payable to the Balance Sheet Credit column  Extend the new balance of Federal Income Tax Expense to the Income Statement debit column  Total the worksheet’s adjustments, Income Statement, & Balance Sheet columns

15. CENTURY 21 ACCOUNTING © Thomson/South-Western 15 LESSON 13-1 TERM REVIEW amortization page 376