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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

The following partial work sheet covers the affairs of Masanto and Company for the year ended June 30.

images

Required

  1. 1. Journalize the six adjusting entries.
  2. 2. Journalize the closing entries.
  3. 3. Journalize the reversing entry as of July 1, for the salaries that were accrued in the June adjusting entry.

Check Figure

Reversing entry amount, $1,240

1.

To determine

Prepare adjusting journal entries for Company M.

Explanation

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 owners’ or stockholders’ equity) to maintain the records according to accrual basis principle and matching concept.

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

  • Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
  • Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Prepare adjusting journal entries for Company M.

Adjusting entry for removing beginning inventory:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
20--    
June30Income Summary 112,200 
   Merchandise Inventory  112,200
  (Record the entry to remove beginning inventory)   

Table (1)

Description:

  • Income Summary is a clearing account which closes revenue, expense, drawings, and net of revenues and expenses to capital accounts. The account is debited to eliminate the beginning inventory balance.
  • Merchandise Inventory is an asset account. Since beginning inventory is eliminated and transferred to Income Summary account, asset account decreased, and a decrease in asset is credited.

Adjusting entry for entering the ending inventory:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
20--    
June30Merchandise Inventory 116,400 
   Income Summary  116,400
  (Record the entry to enter ending inventory)   

Table (2)

Description:

  • Merchandise Inventory is an asset account. Since ending inventory or physical count of inventory at the end of the period is entered to record in the financial statements, asset account increased, and an increase in asset is debited.
  • Income Summary is a clearing account which closes revenue, expense, drawings, and net of revenues and expenses to capital accounts. The account is credited to enter the ending inventory balance.

Adjusting entry for the salaries payable:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
20--    
June30Salary Expense 1,240 
   Salaries Payable  1,240
  (Record accrued salaries expenses)   

Table (3)

Description:

  • Salary Expense is an expense account...

2.

To determine

Prepare closing entries for Company M.

3.

To determine

Journalize the reversing entry.

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