Merano Wool Company manufactures clothing from merino wool. The person preparing the adjusting entries at year-end left for a vacation prior to completing the adjustments. You have been given the following unadjusted trial balance along with some additional information for the December 31, 2014, year-end.
Other information: 1. Assume all accounts have a normal balance. 2. 30% of the balance in Unearned Sales is from sales earned during 2014; the remaining balance is for 2015 sales. 3. Merano warranties its clothing against manufacturer defects and estimates that 4.5% of the 18,800 garments sold during 2014 will be returned for replacement. The average cost of the garments is $75. 4. A partial amortization schedule for the note payable follows:
5. 3% of outstanding receivables are estimated to be uncollectible. 6. A physical count of the inventory showed a balance actually on hand of $143,940. 7. The balance in Income Tax Expense represents taxes accrued and paid for the 2014 period at the rate of $16,000 per month. Assume the income tax rate is 24%.
Required 1. Based on the information provided, journalize the adjusting entries at December 31, 2014. 2. Prepare a classified balance sheet (round all values on the balance sheet to wholenumbers).