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
24 views

Adjusting entries

Good Note Company specializes in the repair of music equipment and is owned and operated by Robin Stahl. On November 30, 2016, the end of the current year, the accountant for Good Note Company prepared the following trial balances:

Chapter 3, Problem 3.4APR, Adjusting entries Good Note Company specializes in the repair of music equipment and is owned and

Instructions

Journalize the seven entries that adjusted the accounts at November 30. None of the 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 GN at the end of the year.

Explanation

An adjusting entry for Supplies expenses:

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

Date Description

Post

Ref.

Debit ($) Credit ($)
2016 Supplies expenses  (1)   8,850  
November 30         Supplies     8,850
  (To record the supplies expenses incurred at the end of the year)      

Table (1)

Working note:

Calculate the value of supplies expense

Suppliesexpense=[(Theunadjusted balanceofsupplies)(Theadjusted balance of supplies)]=($11,250$2,400)=$8,850 (1)

  • Supplies expense decreases the value of owner’s equity by $8,850; hence debit the supplies expenses for $8,850.
  • Supplies are an asset, and it decreases the value of asset by $8,850, hence credit the supplies for $8,850.  

An adjusting entry for insurance expenses:

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

Date Description

Post

Ref.

Debit ($) Credit ($)
2016 Insurance expenses (2)   10,400  
November 30         Prepaid insurance     10,400
  (To record the insurance expenses incurred at the end of the year)      

Table (2)

Working note:

Calculate the value of insurance expense

Insuranceexpense=[(Theunadjusted balanceofprepaid insurance)(Theadjusted balance of prepaid insurance)]=($14,250$3,850)=$10,400 (2)

  • Insurance expense decreases the value of owner’s equity by $10,400; hence debit the insurance expenses for $10,400.
  • Prepaid insurance is an asset, and it decreases the value of asset by $10,400, hence credit the prepaid insurance for $10,400.  

An adjusting entry for depreciation expenses-Equipment:

In this case, Company GN recognized the depreciation expenses on equipment at the end of the year. So, the necessary adjusting entry that the Company GN should record to recognize the accrued expense is as follows:

Date Description

Post

Ref.

Debit ($) Credit ($)
2016 Depreciation expenses –Equipment (3)   11,600  
November 30         Accumulated depreciation-Equipment     11,600
  (To record the depreciation expenses incurred at the end of the year)      

Table (3)

Working note:

Calculate the value of depreciation expense-Equipment

Depreciationexpense=[(Theunadjusted balanceof accumulated depreciation)(Theadjusted balance of accumulated depreciation)]=($94,500$106,100)=$11,600 (3)

  • Depreciation expense decreases the value of owner’s equity by $11,600; hence debit the depreciation expenses for $11,600.
  • Accumulated depreciation is a contra-asset account, and it decreases the value of asset by $11,600, hence credit the accumulated depreciation for $11,600.  

An adjusting entry for depreciation expenses-Automobiles:

In this case, Company GN recognized the depreciation expenses on automobiles at the end of the year. So, the necessary adjusting entry that the Company GN should record to recognize the accrued expense is as follows:

Date Description

Post

Ref.

Debit ($) Credit ($)
2016 Depreciation expenses –Automobiles (4)   7,300  
November 30         Accumulated depreciation-Automobiles     7,300
  (To record the depreciation expenses incurred at the end of the year)      

Table (4)

Working note:

Calculate the value of depreciation expense-Automobiles

Depreciationexpense=[(Theunadjusted balanceof accumulated depreciation)(Theadjusted balance of accumulated depreciation)]=($54,750$62,050)=$7,300 (4)

  • Depreciation expense decreases the value of owner’s equity by $7,300; hence debit the depreciation expenses for $7,300

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

Executive salaries have been shown to be more closely correlated to the size of the firm than to its profitabil...

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

What does the invisible hand of the marketplace do?

Essentials of Economics (MindTap Course List)

What does the invisible hand of the marketplace do?

Principles of Macroeconomics (MindTap Course List)