Introduction: Each financial transaction or economic event will affect either assets, liabilities, or owners’ equity. Thus, the basis for recording the transaction in the accounting system depends on the
Adjustments: Accrual basis accounting requires a number of adjustments at the end of the period. The adjustment is made for unearned revenue, accrued expenses, revenue received in advance, non-cash expenses, and prepaid expenses.
To prepare: The necessary adjusting
Explanation of Solution
The
Date | Account title & explanation | Debit ($) | Credit ($) |
June 30, 2017 | Interest receivable | 33.33 | |
……Interest revenue | 33.33 | ||
(to record interest revenue accrued) | |||
June 30, 2017 | Supplies expense | 5,568 | |
……Supplies | 5,568 | ||
(to record the supplies used) | |||
June 30, 2017 | 3,500 | ||
……Accumulated depreciation − machine | 3,500 | ||
(to record the depreciation expense) | |||
June 30, 2017 | Rent expense | 1,550 | |
……Prepaid rent | 1,550 | ||
(to record the rent expense) | |||
June 30, 2017 | Salaries and wages expense | 5,000 | |
……Salaries and wages payable | 5,000 | ||
(to record wages expense accrued) | |||
June 30, 2017 | Income tax expense | 2,900 | |
……Income tax payable | 2,900 | ||
(to record income tax expense accrued) |
a. Adjustment for Interest receivable
2 years note received for $10,000 at 4 per cent on June 1, 2017. The interest revenue should be recognized for one month. The interest revenue is calculated as follows:
b. Adjustment for supplies used during the month
Particular | Amount ($) |
Supplies in hand on June 1, 2017 | 475 |
Add: Supplies purchased during the month | 5,600 |
Less: Supplies in hand at the end of June 30, 2017 | (507) |
Supplies consumed | 5,568 |
c.The depreciation for the year is calculated as follows:
Monthly depreciation expense is calculated as follows:
d. Adjustment for prepaid rent.
F R Inc. paid on June 1, 2017, three-month prepaid rent. As the accounts are closed every month, the rent of June will be recognized. The rent expense is calculated as follows:
e. Adjustment for wages payable
As wages are paid every Sunday and month-end is Friday, only five days from Monday to Friday require adjustment. The wages for five days are calculated as follows:
f. Adjustment for federal income tax payable
The amount of federal income tax expense during June is $2,900. It will be deducted in calculating the net income of the company.
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Bundle: Using Financial Accounting Information: The Alternative to Debits and Credits, Loose-Leaf Version, 10th + CengageNOWv2, 1 term Printed Access Card
- Adjusting Entries Kretz Corporation prepares monthly financial statements and therefore adjusts its accounts at the end of every month. The following information is available for March 2016: Kretz Corporation takes out a 90-day, 8%, $15,000 note on March 1, 2016, with interest and principal to be paid at maturity. The asset account Office Supplies on Hand has a balance of $1,280 on March 1, 2016. During March, Kretz adds $750 to the account for purchases during the period. A count of the supplies on hand at the end of March indicates a balance of $1,370. The company purchased office equipment last year for $62,600. The equipment has an estimated useful life of six years and an estimated salvage value of $5,000. The companys plant operates seven days per week with a daily payroll of $950. Wage earners are paid every Sunday. The last day of the month is Thursday, March 31. The company rented an idle warehouse to a neighboring business on February 1, 2016, at a rate of $2,500 per month. On this date, Kretz Corporation credited Rent Collected in Advance for six months rent received in advance. On March 1, 2016, Kretz Corporation credited a liability account, Customer Deposits, for $4,800. This sum represents an amount that a customer paid in advance and that Kretz will earn evenly over a four-month period. Based on its income for the month, Kretz Corporation estimates that federal income taxes for March amount to $3,900. Required For each of the preceding situations, prepare in general journal form the appropriate adjusting entry to be recorded on March 31, 2016.arrow_forwardInterest Payable—Quarterly Adjustments Glendive takes out a 12%, 90-day, $100,000 loan with Second State Bank on March 1, 2016. Assume that Glendive prepares adjusting entries only four times a year: on March 31, June 30, September 30, and December 31. Required Prepare the journal entry on March 1, 2016. Prepare the adjusting entry on March 31, 2016. Prepare the entry on May 30, 2016, when Glendive repays the principal and interest to Second State Bank.arrow_forwardNotes Receivable On September 1, 2016, Dougherty Corp. accepted a six-month, 7%, $45,000 interest-bearing note from Rozelle Company in payment of an account receivable. Doughertys year-end is December 31. Rozelle paid the note and interest on the due date. Required Who is the maker and who is the payee of the note? What is the maturity date of the note? Prepare all necessary journal entries that Dougherty needs to make in connection with this note.arrow_forward
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