Concept explainers
1.
Adjusting entries indicates those entries, which are passed in the books of accounts at the end of one accounting period. These entries are passed in the books of accounts as per the revenue recognition principle and the expenses recognition principle to adjust the revenue, and the expenses of a business in the period of their occurrence.
Adjusted
Adjusted trial balance is a trial balance prepared at the end of a financial period, after all the adjusting entries are journalized and posted. It is prepared to prove the equality of the total debit and credit balances.
Rule of Debit and Credit:
Debit - Increase in all assets, expenses & dividends, and decrease in all liabilities and
Credit - Increase in all liabilities and stockholders’ equity, and decrease in all assets & expenses.
To record: The adjusting entries on April 30, 2016 of R Repairs and Services.
1.
Explanation of Solution
a. Accrued fees unearned
Date | Account Titles and Explanation | Debit ($) | Credit ($) |
April, 30 | Accounts Receivable | 9,850 | |
2016 | Fees earned | 9,850 | |
(To record the accounts receivable at the end of the year.) |
Table (1)
The impact on the
Explanation:
- Accounts Receivable is an asset, and it is increased by $9,850. So debit Accounts receivable by $9,850.
- Fees earned are component of stockholders’ equity and increased it by $9,850. So credit fees earned by $9,850.
b.Supplies expense
Date | Account Titles and Explanation | Debit ($) | Credit ($) |
April, 30 | Supplies Expense (1) | 11,540 | |
2016 | Supplies | 11,540 | |
(To record the supplies expense at the end of the accounting period) |
Table (2)
The impact on the accounting equation for the above referred adjusting entry is as follows:
Explanation:
- Supplies expense is a component of stockholders’ equity, and it decreased the stockholders’ equity by $11,540. So debit supplies expense by $11,540.
- Supplies are an asset for the business, and it is decreased by $11,540. So credit supplies by $11,540.
Working Note:
Calculate the value of fees earned for the accounting period
c.
Date | Account Titles and Explanation | Debit ($) | Credit ($) |
April, 30 | Depreciation expense | 6,470 | |
2016 | |
6,470 | |
(To record the depreciation on office equipment for the current year.) |
Table (3)
The impact on the accounting equation for the above referred adjusting entry is as follows:
Explanation:
- Depreciation expense is component of stockholders’ equity and decreased it, so debit depreciation expense by $6,470.
- Accumulated depreciation is a contra asset account, and it decreases the asset value by $6,470. So credit accumulated depreciation by $6,470.
d. Unearned fees
Date | Account Titles and Explanation | Debit ($) | Credit ($) |
April, 30 | Unearned Fees | 15,000 | |
2016 | Fees earned | 15,000 | |
(To record the fees earned from services at the end of the accounting period.) |
Table (4)
The impact on the accounting equation for the above referred adjusting entry is as follows:
Explanation:
- Unearned fees are a liability, and it is decreased by $15,000. So debit unearned rent by $15,000.
- Fees earned are a component of Stockholders’ equity, and it is increased by $15,000. So credit rent revenue by $15,000.
e. Wages expense
Date | Account Titles and Explanation | Debit ($) | Credit ($) |
April, 30 | Wages expenses | 5,200 | |
2016 | Wages Payable | 5,200 | |
(To record the wages accrued but not paid at the end of the accounting period.) |
Table (5)
The impact on the accounting equation for the above referred adjusting entry is as follows:
Explanation:
- Wages expense is a component of Stockholders ‘equity, and it decreased it by $5,200. So debit wage expense by $5,200.
- Wages Payable is a liability, and it is increased by $5,200. So credit wages payable by $5,200.
2.
The revenues, expenses and net income of R Repairs and Services before adjusting entries
2.
Explanation of Solution
The revenues, expenses and net income before adjusting entries of R Repairs and Services are stated below:
- Revenue = $294,750 (given)
- Expenses = $226,350 (2)
- Net income = $68,400 (3)
Working Notes:
1. Calculate the expenses before adjusting entries:
2. Calculate the net income before adjusting entries
Hence, the revenues, expenses and net income of R Repairs and Services are $294,750, $226,350 and $68,400 respectively.
3.
The revenues, expenses and net income of R Repairs and Services after adjusting entries
3.
Explanation of Solution
The revenues, expenses and net income after adjusting entries of R Repairs and Services are stated below:
- Revenue = $319,600 (5)
- Expenses = $249,350 (4)
- Net income = $70,040 (6)
Working Notes:
1. Calculate expenses after adjusting entries:
2. Calculate the revenue after adjusting entries
3. Calculate the net income after adjusting entries
Hence, the revenues, expenses and net income of R Repairs and Services are $319,600, $249,560 and $70,040 respectively.
4.
The effect of the adjusting entries on the capital of K
4.
Explanation of Solution
The capital of K will be reduced by $1,640 after the adjusting entry.
Due to the adjusting entry, there is a decrease in the net income of $1,640
Want to see more full solutions like this?
Chapter 3 Solutions
Bundle: Financial & Managerial Accounting, Loose-leaf Version, 13th + CengageNOWv2, 1 term (6 months) Printed Access Card Corporate Financial ... Access Card for Managerial Accounting, 13th
- Ace Company uses the Aging of receivables method to account for uncollectible accounts. The company had the following balances on January 01, 2019. Part A Accounts receivable...........................................$2,800,000 Allowance for uncollectible accounts...................$88,800 (credit) The company completed the following transactions during 2019. April 20-- Wrote off the balance of $1,000 from Shari Wickham’s account as uncollectible. November 27- Re-instated the account of Louis Benn and recorded the collection of $1,500 as payment in full for her account which had been written off earlier. December 31st- Recorded the uncollectible account expense based on the aging schedule. The schedule showed that $124,500 of accounts receivable was estimated as uncollectible. Made the closing entry for the uncollectible expense account. Requirements: Prepare journal entries for each transaction (No narrations required) Prepare the Allowance for Uncollectible and the…arrow_forwardAce Company uses the Aging of receivables method to account for uncollectible accounts. The company had the following balances on January 01, 2019. Part A Accounts receivable...........................................$2,800,000 Allowance for uncollectible accounts...................$88,800 (credit) The company completed the following transactions during 2019. April 20-- Wrote off the balance of $1,000 from Shari Wickham’s account as uncollectible. November 27- Re-instated the account of Louis Benn and recorded the collection of $1,500 as payment in full for her account which had been written off earlier. December 31st- Recorded the uncollectible account expense based on the aging schedule. The schedule showed that $124,500 of accounts receivable was estimated as uncollectible. Made the closing entry for the uncollectible expense account. Requirements: Prepare journal entries for each transaction (No narrations required) Prepare the Allowance for Uncollectible and the…arrow_forwardAce Company uses the Aging of receivables method to account for uncollectible accounts. The company had the following balances on January 01, 2019. Part A Accounts receivable...........................................$2,800,000 Allowance for uncollectible accounts...................$88,800 (credit) The company completed the following transactions during 2019. April 20--Wrote off the balance of $1,000 from Shari Wickham’s account as uncollectible. November 27- Re-instated the account of Louis Benn and recorded the collection of $1,500 as payment in full for her account which had been written off earlier. December 31st- i. Recorded the uncollectible account expense based on the aging schedule. The schedule showed that $124,500 of accounts receivable was estimated as uncollectible. ii. Made the closing entry for the uncollectible expense account. Requirements: Prepare journal entries for each transaction (No narrations required) Prepare the Allowance for Uncollectible and…arrow_forward
- Ace Company uses the Aging of receivables method to account for uncollectible accounts. Thecompany had the following balances on January 01, 2019.Part AAccounts receivable...........................................$2,800,000Allowance for uncollectible accounts...................$88,800 (credit)The company completed the following transactions during 2019. April 20-- Wrote off the balance of $1,000 from Shari Wickham’s account asuncollectible. November 27- Re-instated the account of Louis Benn and recorded the collection of$1,500 as payment in full for her account which had been written off earlier. December 31sti. Recorded the uncollectible account expense based on the aging schedule. Theschedule showed that $124,500 of accounts receivable was estimated asuncollectible.ii. Made the closing entry for the uncollectible expense account.Requirements:1. Prepare journal entries for each transaction (No narrations required)2. Prepare the Allowance for Uncollectible and the Accounts…arrow_forwardAn analysis and aging of accounts receivable of the Lucille Company at December 31, 2002, showed the following:Accounts Receivable ..................................Allowance for Doubtful Accounts (before adjustment) ................................Accounts estimated to be uncollectible ...............₱840,00 036,000 (cr )76,800Compute for the net realizable value of the accounts receivable of Lucille Company at December 31, 2002.arrow_forwardPrepare a November 30 balance sheet in proper form for Green Bay Delivery Service from the following alphabetical list of the accounts at November 30: Accounts receivable....................... $10,000Accounts payable................................ 18,000Building.............................................. 28,000Cash.................................................. 8,000Notes payable..................................... 45,000Office equipment................................... 12,000R. Perkins, Capital................................ 50,000Trucks............................................... 55,000[Hint: Please follow the balance sheet format. You need to re-organize the order of the account. Remember to include the heading (name of company...etc)]arrow_forward
- UNCOLLECTIBLE ACCOUNTSALLOWANCE METHOD Lewis Warehouse used the allowance method to record the following transactions, adjusting entries, and closing entries during the year ended December 31, 20--: Selected accounts and beginning balances on January 1, 20--, are as follows: REQUIRED 1. Open the three selected general ledger accounts. 2. Enter the transactions and the adjusting and closing entries in a general journal (page 6). After each entry, post to the appropriate selected accounts. 3. Determine the net realizable value as of December 31, 20--.arrow_forwardThe following account balances were found for Jetson Corp. at the beginning of its fiscal year, January 1, 2020: Accounts Receivable (debit balance)................................................. $1,240,250 Allowance for Doubtful Accounts (credit balance)....................................... 19,220 The following transactions are for the year 2020: Sales for the year were $8,100,000, of which 60% was on credit, and sales returns, all on credit, were $146,000. Cash collections, excluding recoveries, were $5,416,000. Jetson wrote off $62,500 in receivables, of which half was later recovered and collected. The company’s credit and collection manager has estimated that 6% of outstanding accounts receivable are uncollectible. Required: Calculate the bad debt expense for the year and record the appropriate journal entry.arrow_forwardThe following summarizes the aging of accounts receivable for Orange Incorporated as of July 31, Year 1: Number of Days Unpaid Not yet due 1 to 30 days past due 31 to 60 days past due Over 60 days past due Total Accounts Receivable 11.130 $ 175,982 89,200 53,600 31,800 Historical % Uncollectible 17,424 margin of error +/-3 www. 29 12% 18% The unadjusted balance of the Allowance for Doubtful Accounts of Orange Incorporated is a credit balance in the amount of $17.578 on July 31, Year 1. What is the amount of the adjusting entry to be recorded on July 31 Year 17 35%arrow_forward
- 1. Prepare a November 30 balance sheet in proper form for Green Bay Delivery Service from the following alphabetical list of the accounts at November 30: Accounts receivable.......................$10,000Accounts payable................................18,000Building..............................................28,000Cash..................................................8,000Notes payable.....................................45,000Office equipment...................................12,000R. Perkins, Capital................................?Trucks...............................................55,000arrow_forwardUse the following items taken from the financial statements of the Postal Service for the year ending December 31, 2018 to answer questions: Accounts payable ..............................................................$10,000 Accounts receivable ............................................................11,000 Accumulated depreciation – equipment ..........................28,000 Advertising expense ............................................................21,000 Cash ......................................................................................14,000 Owner’s capital (1/1/18) ...................................................105,000 Owner’s drawings ...............................................................14,000 Depreciation expense ........................................................12,000 Insurance expense ...............................................................3,000 Note payable, due 6/30/19…arrow_forwardJournalize the transactions under the allowance method, assuming that the allowance account had a beginning balance of $18,330 at the beginning of the year and the company uses the analysis of receivables method. Rustic Tables Company prepared the following aging schedule for its accounts receivable: Aging Class (Numberof Days Past Due) Receivables Balanceon December 31 Estimated Percent ofUncollectible Accounts 0-30 days $293,000 1 % 31-60 days 110,000 8 61-90 days 35,000 20 91-120 days 13,000 55 More than 120 days 18,000 80 Total receivables $469,000arrow_forward
- Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:CengageCollege Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,