14 Adjustmentsss

Workbook

[email protected] Adjustments (Solved)

60

Unit 6

1. Prepaid Insurance account began the year with a balance of $230. During the year, insurance in the amount of $570 was

purchased. At the end of the year March 31st, 2009 the amount of insurance still unexpired was $350. Prepare the year end

adjusting entry.

General Journal

Date Account Title and Explanations Ref Amount

Debit Credit

2009

March 31 Insurance Expense 450

Prepaid Insurance 450

2. The depreciation expense on office equipment for the month of March is $50. This is the second month that the office

Equipment, which cost $950, has been owned. Prepare the adjusting entry for March and show the adjustment using

written down method (WDM) for depreciation recording.

General Journal

Date Account Title and Explanations Ref

Amount

Debit Credit

March 31 Dep. Expense_Office Equipment 50

50 Office Equipments

3. Wages are paid every Saturday for a five day work week (Mon – Fri; two days are unpaid and free). Wages are $2,000

per week. Prepare the adjusting entry on June 30, assuming July 1 falls on a Wednesday.

General Journal


Amount (Rs)

Debit Credit

Wages Expense 800

Wages Payable 800

Workbook


61

Unit 6

4. On July 3, a deposit in the amount of $5,000 was received for services to be performed. By the end of the month,

services in the amount of $1,200 were performed. Prepare journal entries for the original receipt of the deposit and the

adjusting entry on 31st July.

General Journal


Debit Credit

July 3 Cash 5,000

Unearned Revenue 5,000

31 Unearned Revenue 1,200

Earned Revenue 1,200

5. On October 4, Smith Company rendered services valued at $11,000. The client will pay for the services November 1 and

closing are done at the end of each month pass this transaction at the end of period.

General Journal


Amount

Debit Credit

31 Account Receivable 11,000

Services 11,000

6. At year end, property taxes expense for six months, estimated at $2,000, have accrued but have not been recorded. Prepare

the adjusting entry at year end (12/31).

General Journal


Amount

Debit Credit

Dec 31 Taxes Expense 2,000

Taxes Payable 2,000

Workbook


62

Unit 6

7. The Supplies asset account began the year with a balance of $190. During the year, supplies in the amount of $490 were

purchased. At the end of the year the inventory of supplies on hand was $220. Prepare the year end adjusting entry.

General Journal


Amount

Debit Credit

Supplies Expenses 460

Supplies Assets 460

8. At year end, unrecorded interest receivable from the US Government bonds is $1,700. Prepare the adjusting entry

General Journal


Amount

Debit Credit

Interest Receivable 1,700

1,700 Interest

9. Bad Debts during the year were $ 1,500. Pass journal entry by using direct write off method for bad debt treatment.

General Journal


Amount

Debit Credit

Bad Debts 1,500

Sundry Debtors 1,500

10. Prepare the journal entry for XYZ Company to record its $17,000 of Bad debt expense for the year 2009 by using

allowance method for bad debt treatment.

General Journal


Amount

Debit Credit

Bad Debts 17,000

Allowance for Bad Debts 17,000

Workbook


63

Unit 6

11. During the year 2000, XYZ Company identified $16,000 of uncollectible Accounts receivable and wrote them off.

Prepare the journal entry for XYZ Company to write off $16,000 of uncollectible Accounts receivable.

General Journal


Amount

Debit Credit

Bad Debts 16,000



Account Receivable 16,000

12. Prepare the journal entries for ABC Company to record cash collections on Accounts receivable and to record recoveries

of Accounts receivable that had previously been written off. Included in the total cash collections during 2007 was $900

that represented collections of Accounts receivable that had previously been written off.

General Journal


Debit Credit Account Receivable 900

Allowance for Bad Debts 900

Cash 900

Account Receivable 900

13. On November 12, Smith Company received $8,000 in advance of services to be rendered over the next two months

($4,000 per month – December and January). Prepare all the associated journal entries in regards to this business

transaction from November 12, to January 31st, assuming that monthly closing is applicable.

General Journal


Amount

Debit Credit

Nov 12 Cash 8,000

Unearned Services 8,000

Dec 31 Unearned Services 4,000

Earned Services 4,000

Jan 31 Unearned Services 4,000

Earned Services 4,000

Workbook


64

Unit 6

14. At year end, unrecorded interest expense due to creditors was $1,100 (payable in the next year). Prepare the adjusting entry

at year end (12/31).

General Journal


Amount

Debit Credit

Dec 31 Interest Expense 4,000

Interest Payable 4,000

15. The Frontier Chip Company offers credit terms to its customers. At the end of 2009, accounts receivable totalled

$2,223,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible

accounts had a credit balance of $68,000 at the beginning of 2009 and $46,200 in receivables was written off during the

year as uncollectible. No previously written off receivables were collected. The company estimates bad debts by

applying a percentage of 3% to net accounts receivable at the end of the year.

General Journal


Amount

Debit Credit

Allowance for Uncollectible 46,200


Bad Debts 43,504

Allowance for Uncollectible 43,504

16. Collections on accounts receivable during the year were $70,000.

General Journal


Amount (Rs)

Debit Credit

Cash 70,000


Workbook


65

Unit 6

17. Wildwood, Incorporated, had net sales for the month of December, 2004 were $37,000. At December 31, before month-

end adjusting entries, the balances in selected accounts were: Accounts Receivable, $20,100 debit, and Allowance for

Doubtful Accounts, $12,800 credit. Record the bad debts write off for December under the assumption that 1% of its net

sales will prove to be uncollectible.

General Journal


Amount (Rs)

Debit Credit

Allowance for Doubtful account 370

Account Receivable 370

18. Company reports the following financial information before adjustments.

Dr. Cr.

Accounts Receivable $100,000

Allowance for Doubtful Accounts $2,000

Sales (all on credit) 900,000

Sales Returns and Discount 50,000

Prepare the journal entry to record Bad Debt Expense assuming Company estimates bad debts at (a) 1% of net

sales and (b) 5% of net accounts receivable.

General Journal

Date Account Title and Explanations Ref Amount (Rs)

Debit Credit a Bad Debt Expense 6,500 Allowance for Bad Debts 6,500

b Bad Debt Expense 3,000


19. Salaries expense in Trial balance is $ 90,000. Salaries expense for whole year is to $ 72,000.

General Journal


Amount (Rs)

Debit Credit

Prepaid Salaries 18,000

Salaries Expense 18,000

Workbook


66

Unit 6

20. Pass the necessary entries from the following information using provision method.

Trial Balance Description Amount Description Amount

Sundry Debtors 40,600 Provision for Bad debts 1,500

Bad debts Rs. 600 after preparation of Trial Balance and create provision for bad debts @ 5% on sundry debtors.

General Journal


Debit Credit a Bad Debt Expense 600 Sundry Debtors 600

b Profit and Loss account 500

Provision for bad debs 500

21. Pass the necessary entries from the following information using provision method.

Trial Balance Description Amount Description Amount

Sundry Debtors 40,600 Provision for Bad debts 2,900

Bad debts Rs. 600 after preparation of Trial Balance and create provision for bad debts @ 5% on sundry debtors.

General Journal


Debit Credit a Bad Debt Expense 600 Sundry Debtors 600

b Provision for bad debts 900

Profit and Loss account 900

22. Total sundry debtors in trial balance are Rs. 40,600, Bad debts Rs. 600 after preparation of Trial Balance and create

provision for bad debts @ 5% on sundry debtors and create provision for discount on sundry debtor @ 2 %.

General Journal


Debit Credit Profit and Loss account 760 Provision for Discount on Debtor 760

Documents

14 Adjustmentsss