Concept explainers
Prepare the necessary
Explanation of Solution
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
Factory overhead cost is the cost other than the direct material cost, and the direct labor cost which is not directly involved in the production of converting the raw materials to the finished products. If the direct material cost or direct labor cost does not constitute the major portion of the total cost of the finished product, then it may be classified as the factory overhead cost. For example: Cost of repairing, and maintaining factory equipment.
Prepare an adjusting entry to record the factory overhead applied to work in process ending inventory.
Date | Account Title and Explanation | Post ref. |
Debit ($) |
Credit ($) |
December 31 | Work in process inventory | 7,780 | ||
Factory overheads | 7,780 | |||
(To record the transfer of factory overheads to work in process) |
Table (1)
- Work in process inventory is an asset account, and it increases the value of asset. Hence, debit the work in process inventory account with $7,780.
- Factory overhead (expense) is a component of owner’s equity, and there is a decrease in the value of expense. Hence, credit the factory overhead account with $7,780.
Prepare an adjusting entry to record the interest revenue earned during the year.
Date | Account Title and Explanation | Post ref. |
Debit ($) |
Credit ($) |
December 31 | Interest receivable | 435 | ||
Interest revenue | 435 | |||
(To record the interest revenue earned at the end of the year) |
Table (2)
- Interest receivable is an asset account, and it increases the value of asset. Hence, debit the interest receivable account with $435.
- Interest revenue is a component of owner’s equity, and it increases the value of owner’s equity. Hence, credit the interest revenue account with $435.
Prepare an adjusting entry to record the
Date | Account Title and Explanation | Post ref. |
Debit ($) |
Credit ($) |
December 31 | Bad debt expense | 3,876 | ||
Allowance for doubtful account | 3,876 | |||
(To record the bad debt expense estimated at the end of the year) |
Table (3)
- Bad expense is component of owner’ equity and it decreases the value of owner’s equity. Hence, debit the bad expense with $3,876.
- Allowance for doubtful accounts is a contra-asset account, and it decreases the value of assets. Hence, credit the allowance for doubtful account with $3,876.
Prepare an adjusting entry to record the office supplies expense incurred during the year.
Date | Account Title and Explanation | Post ref. |
Debit ($) |
Credit ($) |
December 31 | Office supplies expense | 750 | ||
Office supplies | 750 | |||
(To adjust the office supplies expense incurred at the end of the accounting year) |
Table (4)
- Offices supplies expense is component of shareholders’ equity, and it decreases the value of owner’s equity. Hence, debit the office supplies expense with $750.
- Office supplies are asset account, and it decreases the value of assets. Hence, credit the office supplies account with $750.
Prepare an adjusting entry to record the factory supplies used during the year.
Date | Account Title and Explanation | Post ref. |
Debit ($) |
Credit ($) |
December 31 | Factory overhead (factory supplies expense) | 4,160 | ||
Factory supplies | 4,160 | |||
(To record the supplies expense incurred at the end of the year) |
Table (5)
- Factory overhead (expense) is a component of owner’s equity, and there is an increase in the value of expense. Hence, debit the factory overhead account with $4,160.
- Factory supplies are asset account, and it decreases the value of asset. Hence, credit the factory overhead account with $4,160.
Prepare an adjusting entry to record the insurance expense on the factory building and equipment incurred during the year.
Date | Account Title and Explanation | Post ref. |
Debit ($) |
Credit ($) |
December 31 | Factory overhead (insurance expense-factory and equipment) | 3,200 | ||
Prepaid insurance | 3,200 | |||
(To record the insurance expense incurred at the end of the year) |
Table (6)
- Factory overhead (insurance expense) is a component of owner’s equity, and there is an increase in the value of expense. Hence, debit the factory overhead account with $3,200.
- Prepaid insurance is an asset account, and it decreases the value of asset. Hence, credit the prepaid insurance account with $3,200.
Prepare an adjusting entry to record the
Date | Account Title and Explanation | Post ref. |
Debit ($) |
Credit ($) |
December 31 | Factory overhead (depreciation expense) | 6,800 | ||
| 6,800 | |||
(To record the depreciation expense incurred at the end of the year) |
Table (7)
- Factory overhead (depreciation expense) is a component of owner’s equity, and there is an increase in the value of expenses. Hence, debit the factory overhead account with $6,800.
- Accumulated depreciation-factory building is a contra-asset account, and it decreases the value of asset. Hence, credit the accumulated depreciation-Factory building account with $6,800.
Prepare an adjusting entry to record the depreciation expense on equipment incurred at the end of the accounting year.
Date | Account Title and Explanation | Post ref. |
Debit ($) |
Credit ($) |
December 31 | Factory overhead (depreciation expense) | 4,200 | ||
Accumulated depreciation-Factory equipment | 4,200 | |||
(To record the depreciation expense incurred at the end of the year) |
Table (8)
- Factory overhead (depreciation expense) is a component of owner’s equity, and there is an increase in the value of expenses. Hence, debit the factory overhead account with $4,200.
- Accumulated depreciation-factory equipment is a contra-asset account, and it decreases the value of asset. Hence, credit the accumulated depreciation-factory equipment account with $4,200.
Want to see more full solutions like this?
Chapter 27 Solutions
Bundle: College Accounting, Chapters 1-15, 22nd + Study Guide with Working Papers + CengageNOWv2™, 1 term Printed Access Card
- Assume the following data for Oshkosh Company before its year-end adjustments: Journalize the adjusting entries for the following: a. Estimated customer refunds and allowances b. Estimated customer returnsarrow_forwardADJUSTING JOURNAL ENTRIES FOR A MANUFACTURING BUSINESS Prepare the December 31 adjusting journal entries for Ortiz Company. Data for the end of the year adjustments are as follows:arrow_forwardADJUSTING JOURNAL ENTRIES Prepare the December 31 adjusting journal entries for Davis Company. Data for the end of the year adjustments are as follows:arrow_forward
- Journalize the adjusting entries from the partial work sheet for Newkirk Company as of September 30.arrow_forwardCLOSING JOURNAL ENTRIES Prepare closing journal entries for Koehn Company for the year ended December 31. Data for the closing entries are as follows:arrow_forwardJournalize the following adjusting entries that were included on the work sheet for the month ended December 31.arrow_forward
- ADJUSTING, CLOSING, AND REVERSING ENTRIES A partial work sheet for Baldwin Company is shown on the next page. Data for adjusting the accounts are as follows: REQUIRED 1. Prepare the December 31 adjusting journal entries for Baldwin Company. 2. Prepare the December 31 closing journal entries for Baldwin Company. 3. Prepare the reversing journal entries as of January 1, 20-2, for Baldwin Company.arrow_forwardREVERSING ENTRIES Prepare reversing journal entries for Hendrix Company on January 1, 20-2. The following year-end adjustments were made:arrow_forwardJournalize the adjusting entries from the partial work sheet on the next page for Brady Company for the month ended May 31.arrow_forward
- Journal entries using the periodic inventory system The following selected transactions were completed by Air Systems Company during January of the current year. Air Systems uses the periodic inventory system. Journalize the entries to record the transactions of Air Systems Company.arrow_forwardThe following accounts appear in the ledger of Celso and Company as of June 30, the end of this fiscal year. The data needed for the adjustments on June 30 are as follows: ab.Merchandise inventory, June 30, 54,600. c.Insurance expired for the year, 475. d.Depreciation for the year, 4,380. e.Accrued wages on June 30, 1,492. f.Supplies on hand at the end of the year, 100. Required 1. Prepare a work sheet for the fiscal year ended June 30. Ignore this step if using CLGL. 2. Prepare an income statement. 3. Prepare a statement of owners equity. No additional investments were made during the year. 4. Prepare a balance sheet. 5. Journalize the adjusting entries. 6. Journalize the closing entries. 7. Journalize the reversing entry as of July 1, for the wages that were accrued in the June adjusting entry. Check Figure Net income, 14,066arrow_forwardSelected transactions for Niles Co. during March of the current year are listed in Problem 6-1B. Instructions Journalize the entries to record the transactions of Niles Co. for March using the periodic inventory system.arrow_forward
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,College Accounting, Chapters 1-27 (New in Account...AccountingISBN:9781305666160Author:James A. Heintz, Robert W. ParryPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
- College Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College PubCentury 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:CengageFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,