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Adjusting and reversing entries On the basis of the following data, (a) journalize the adjusting entries at December 31, the end of the current fiscal year, and (b) journalize the reversing entries on January 1, the first day of the following year: 1. Sales salaries are uniformly $11,750 for a five-day workweek, ending on Friday. The last payday of the year was Friday, December 26. 2. Accrued fees earned but not recorded at December 31, $51,300.

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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 4, Problem 27E
Textbook Problem
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Adjusting and reversing entries

On the basis of the following data, (a) journalize the adjusting entries at December 31, the end of the current fiscal year, and (b) journalize the reversing entries on January 1, the first day of the following year:

1. Sales salaries are uniformly $11,750 for a five-day workweek, ending on Friday. The last payday of the year was Friday, December 26.

2. Accrued fees earned but not recorded at December 31, $51,300.

(a)

To determine

Record the adjusting entries at December 31.

Explanation of Solution

Adjusting entries:  Adjusting entries are the journal entries, which are recorded at the end of the accounting period to correct or adjust the revenue and expense accounts, to concede with the accrual principle of accounting.

Accounting rules for journal/adjusting entries:

  • To record increase balance of account: Debit assets, expenses, losses and credit liabilities, capital, revenue and gains.
  • To record decrease balance of account: Credit assets, expenses, losses and debit liabilities, capital, revenue and gains.

Reversing Entries: Reversing entries are made at the beginning of the accounting period when the accountant needs to cancel any entry made in the previous accounting period. It is done in order to eliminate any errors that might have occurred in the calculation of the revenue or expenses and henceforth increase the efficiency of the financial statements for an improved decision-making.

Adjusting entry for salaries expense:

DateAccounts Title and ExplanationPost Ref.Debit ($)Credit ($)
December  31Salaries and Wages Expense 7,050 
             Wages Payable  7,050
 (To record the adjustment for accrued wages)   

Table (1)

  • • Debit to increase the salaries and wages expense account (Increase in salaries and wages expense decreases stockholders’ equity account).
  • • Credit to increase the salaries and wages payable account (liability account).

Working note:

Calculate the amount of accrued salaries:

Step 1: Calculate the per day salary amount...

(b)

To determine

Record the reversing entry on January 1.

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Financial And Managerial Accounting
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