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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

ADJUSTING, CLOSING, AND REVERSING ENTRIES Prepare entries for (a), (b), and (c) listed below using two methods. First, prepare the entries without making a reversing entry. Second, prepare the entries with the use of a reversing entry. Use T-accounts to assist your analysis.

  1. (a) Wages paid during 20-1 are $20,080.
  2. (b) Wages earned but not paid (accrued) as of December 31, 20-1, are $280.
  3. (c) On January 3, 20-2, payroll of $840 is paid, which includes the $280 of wages earned but not paid in December.

To determine

Prepare the journal entries without making reversing entry, and with making reversing entry, and use T-accounts to assist your analysis.

Explanation

Prepare journal entries without making reversing entries and use T-accounts to assist your analysis.

DateAccount titles and ExplanationDebitCredit
12/31/20-1Wages expenses$280
     Wages payable$280
(To record adjusting entry for wages expense)
12/31/20-1Income summary$20,360
     Wages expense$20,360
(To record closing entry to for expense accounts)
1/1/20-2No Journal entry required
1/3/20-2Wages expense$560
Wages payable$280
     Cash$840
(To record payment of payroll expenses)

Table (1)

Adjusting entries for wages expense:

  • Wages expense is a component of owners’ equity, and it increases the expenses accounts. Therefore, debit wages expense account for $280.
  • Wages payable is a current liability, and it is increased. Therefore, credit wages payable account for $280.

Closing entry for expense accounts:

  • Income summary is a component of owners’ equity, and it decreases the revenue accounts. Therefore, debit income summary account for $20,360.
  • Wages expense is a component of owners’ equity, and it decreases the expenses accounts. Therefore, credit wages expense account for $20,360.

Payment of payroll expenses:

  • Wages expense is a component of owners’ equity, and it increases the expenses accounts. Therefore, debit wages expense account for $560.
  • Wages payable is a current liability, and it is decreased. Therefore, debit wages payable account for $280.
  • Cash is a current asset, and it is decreased. Therefore, credit cash account for $840.

T-Accounts:

Prepare journal entries with reversing entries and use T-accounts to assist your analysis...

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