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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

Your supervisor just finished a work sheet for the month of June, but all of the columns except those shown on the next page were left unreadable because of a spilled latte. You have been asked to journalize the adjusting entries using the surviving partial work sheet.

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To determine

Prepare adjusting journal entries from the partial worksheet.

Explanation

Adjusting entries: Adjusting entries are those entries which are recorded at the end of the year, to update the income statement accounts (revenue and expenses) and balance sheet accounts (assets, liabilities, and owners’ or stockholders’ equity) to maintain the records according to accrual basis principle and matching concept.

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

  • Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
  • Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Prepare adjusting journal entries from the partial worksheet.

Adjusting entry for the prepaid insurance:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
  Insurance Expense 210 
   Prepaid Insurance  210
  (Record part of prepaid insurance expired)   

Table (1)

Description:

  • Insurance Expense is an expense account. Since expenses decrease equity, equity value is decreased, and a decrease in equity is debited.
  • Prepaid Insurance is an asset account. Since amount of insurance is expired, asset account decreased, and a decrease in asset is credited.

Adjusting entry for the depreciation expense:

DateAccount Titles and ExplanationPost Ref...

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