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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

On December 31, the end of the year, the accountant for Fireside Magazine was called away suddenly because of an emergency. However, before leaving, the accountant jotted down a few notes pertaining to the adjustments. Journalize the necessary adjusting entries. Assume that Fireside Magazine uses the periodic inventory system.

a–b. A physical count of inventory revealed a balance of $199,830. The Merchandise Inventory account shows a balance of $202,839.

c. Subscriptions received in advance amounting to $156,200 were recorded as Unearned Subscriptions. At year-end, $103,120 has been earned.

d. Depreciation of equipment for the year is $12,300.

e. The amount of expired insurance for the year is $1,612.

f. The balance of Prepaid Rent is $2,400, representing four months’ rent. Three months’ rent has expired.

g. Three days’ salaries will be unpaid at the end of the year; total weekly (five days’) salaries are $4,000.

h. As of December 31, the balance of the supplies account is $1,800. A physical inventory of the supplies was taken, with an amount of $920 determined to be on hand.

To determine

Journalize the adjusting entries using the periodic inventory system.

Explanation

Rules of Debit and Credit: Debit all increase in assets, expenses and losses account and all decrease in liabilities, revenue and owners’ equity account. Credit all increase in liabilities, revenue and owners’ equities account and all decrease in assets, expenses account.

Adjusting entries: Adjusting entries are those entries which are recorded at the end of the year, to update the income statement accounts (revenue and expenses) and balance sheet accounts (assets, liabilities, and stockholders’ equity) to maintain the records according to accrual basis principle.

Periodic inventory system: The method or system of recording the transactions related to inventory occasionally or periodically are referred to as periodic inventory system.

Journalize the adjusting entries.

Table (1)

Description:

  1. a. Income summary is a temporary account and it is debited in case of net profit. Therefore, debit the income summary. Merchandise Inventory is an asset (current) account and it is decreased. Therefore, credit merchandise inventory.
  2. b. Merchandise Inventory is an asset (current) account and it is increased. Therefore, debit the merchandise inventory...

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