BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

Solutions

Chapter
Section
BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
1 views

Adjusting entries from trial balances

The unadjusted and adjusted trial balances for American Leaf Company on October 31, 2016, follow:

Chapter 3, Problem 3.26EX, Adjusting entries from trial balances The unadjusted and adjusted trial balances for American Leaf

Journalize the five entries that adjusted the accounts at October 31, accounts were affected by more than one adjusting entry.

To determine

Adjusting entries:

Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle.  All adjusting entries affect at least one income statement account (revenue or expense), and one balance sheet account (asset or liability).

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

  • Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
  • Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To prepare: The adjusting entries in the books of Company A at the end of the October 31, 2016.

Explanation

The adjusting entries in the books of Company A are as follows:

An adjusting entry for fees earned:

In this case, Company A recognized the fees revenue at the end of the October month. So, the necessary adjusting entry that the Company A should record to recognize the accrued fees is as follows:

Date Description

Post

Ref.

Debit

($)

Credit ($)
2016 Accounts receivable (1)   6  
October 31         Fees earned     6
  (To record the fees earned at the end of the month)      

Table (1)

Working note:

Calculate the value of accrued fees at end of the October

Accrued fees=(Value of fees earned after the adjustmentValue of fees earned before the adjustment)=$80$74=$6 (1)

  • Account receivable is an asset, and it increases the value of asset by $6, hence debit the accounts receivable for $6. 
  • Fees earned increases the value of owner’s equity by $6; hence credit the fees earned for $6.

For the above journal entry the accounting equation is affected as below:

{Assets(+Accounts receivable $6)} = {Liabilities }{Owner's Equity(+Fees earned $6)}

An adjusting entry for Supplies expenses:

In this case, Company A recognized the supplies expenses at the end of the October month. So, the necessary adjusting entry that the Company A should record to recognize the supplies expense is as follows:

Date Description

Post

Ref.

Debit ($) Credit ($)
2016 Supplies expenses   2  
October 31         Supplies     2
  (To record the supplies expenses incurred at the end of the October)      

Table (2)

  • Supplies expense decreases the value of owner’s equity by $2; hence debit the supplies expenses for $2.
  • Supplies are an asset, and it decreases the value of asset by $2, hence credit the supplies for $2.  

For the above journal entry the accounting equation is affected as below:

{Assets(Supplies $2)} = {Liabilities }{Owner's Equity(Supplies expense $2)}

An adjusting entry for insurance expenses:

In this case, Company A recognized the insurance expenses at the end of the October month. So, the necessary adjusting entry that the Company A should record to recognize the prepaid expense is as follows:

Date Description

Post

Ref.

Debit ($) Credit ($)
2016 Insurance expenses   12  
October 31         Prepaid insurance     12
  (To record the insurance expenses incurred at the end of the October)      

Table (3)

  • Insurance expense decreases the value of owner’s equity by $12; hence debit the insurance expenses for $12.
  • Prepaid insurance is an asset, and it decreases the value of asset by $12, hence credit the prepaid insurance for $12

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What are the three major objectives of budgeting?

Financial & Managerial Accounting

Differentiate between FOB origin and FOB destination pricing.

Foundations of Business (MindTap Course List)

PORTFOLIO REQUIRED RETURN Suppose you are the money manager of a 4 million investment fund. The fund consists o...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

A payroll register is a multi-column form used to assemble the data required at the end of each payroll period.

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)