Chapter 15, Problem 7SEB

### College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

Chapter
Section

### 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. (a) Wages paid during 20-1 are \$20,080. (b) Wages earned but not paid (accrued) as of December 31, 20-1, are \$280. (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.

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

Table (1)

• Wages expense is a component of ownersâ€™ 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 ownersâ€™ equity, and it decreases the revenue accounts. Therefore, debit income summary account for \$20,360.
• Wages expense is a component of ownersâ€™ 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 ownersâ€™ 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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