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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Problem 3-68B Inferring Adjusting Entries from Account Balance Changes

The following schedule shows all the accounts of Eagle Imports that received year end adjusting entries:

Chapter 3, Problem 68BPSB, Problem 3-68B Inferring Adjusting Entries from Account Balance Changes The following schedule shows

Required:

  1. Calculate the missing amounts identified by the letters (a) through (e).
  2. Prepare the five adjusting entries that must have been made to cause the account changes as indicated.

To determine

Concept Introduction:

Adjusting entries are required to adjust the accounts according to the accrual basis of accounting at the end of the every accounting period. For example: Recording the depreciation expense on depreciable assets at the end of each accounting year.

The business activity for each type of adjusting entry is explained as follows:

  • Accrued revenue: The adjusting entry for Accrued revenue is prepared to record the revenue earned during the period.
  • Accrued Expense: The adjusting entry for Accrued expense is prepared to record the expenses incurred during the period.
  • Deferred Revenue: The adjusting entry for Deferred revenue is prepared to defer the revenue that belong to next period.
  • Deferred expenses: The adjusting entry for Deferred expense is prepared to defer the expense that belong to next period.
  • Depreciation: The adjusting entry for depreciation expense is prepared to record the depreciation expense that belong to current period.
  • Requirement-1:

To Calculate:

The missing amounts.

Explanation

The missing amounts are calculated as follows:

    Eagle Imports
    Account Unadjusted Balance Adjusted Balance
    Prepaid Insuarnce $ 15,390 $4,144 (a)
    (15390-(12746-1500)
    Accumulated Depreciation $ 92,500 $103,000
    Interest Payable $- $4,175 (b)
    (5300-1125)
    Wages Payable $- $ 17,600 (c)
To determine

Concept Introduction:

Adjusting entries are required to adjust the accounts according to the accrual basis of accounting at the end of the every accounting period. For example: Recording the depreciation expense on depreciable assets at the end of each accounting year.

The business activity for each type of adjusting entry is explained as follows:

  • Accrued revenue: The adjusting entry for Accrued revenue is prepared to record the revenue earned during the period.
  • Accrued Expense: The adjusting entry for Accrued expense is prepared to record the expenses incurred during the period.
  • Deferred Revenue: The adjusting entry for Deferred revenue is prepared to defer the revenue that belong to next period.
  • Deferred expenses: The adjusting entry for Deferred expense is prepared to defer the expense that belong to next period.
  • Depreciation: The adjusting entry for depreciation expense is prepared to record the depreciation expense that belong to current period.
  • Requirement-2:

    To Prepare:

    The adjusting entries for the adjustments.

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