Adjusting entries Adjusting entries are those entries which are made at the end of the accounting period, to record the revenues in the period of which they have been earned and to record the expenses in the period of which have been incurred, as well as to update all the balances of assets and liabilities accounts on the balance sheet, and to ascertain accurate amount of net income (loss) on the income statement to maintain the records according to the accrual basis principle. Accounting rules for journal 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. To prepare: The adjusting entries needed for different situations of KW Services.

Question

Danza Inc. reported income of $440,000 for the year ended June 30, 20X8. However, the records show that at year end, the following items had not been recorded: On May 1, 20X8, Danza received a $12,000 advance for a six-month job and credited Revenue for $12,000. Interest on a $12,000 note payable bearing a 10% interest rate is paid quarterly. The last payment was made at the end of May 20X8. Danza’s payroll is 14 salaried employees, each earning $900 a week for a 5-day workweek. Friday is payday. June 30 was a Tuesday. Prepare the adjusting entries necessary for the year ended June 30, 20X8. What is Danza’s net income for 20X8?

Answer 1

Question

Chapter 3, Problem 3.23E

To determine

Adjusting entries

Adjusting entries are those entries which are made at the end of the accounting period, to record the revenues in the period of which they have been earned and to record the expenses in the period of which have been incurred, as well as to update all the balances of assets and liabilities accounts on the balance sheet, and to ascertain accurate amount of net income (loss) on the income statement to maintain the records according to the accrual basis principle.

Accounting rules for journal 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.

To prepare: The adjusting entries needed for different situations of KW Services.

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Danza Inc. reported income of $440,000 for the year ended June 30, 20X8. However, the records show that at year end, the following items had not been recorded: On May 1, 20X8, Danza received a $12,000 advance for a six-month job and credited Revenue for $12,000. Interest on a $12,000 note payable bearing a 10% interest rate is paid quarterly. The last payment was made at the end of May 20X8. Danza’s payroll is 14 salaried employees, each earning $900 a week for a 5-day workweek. Friday is payday. June 30 was a Tuesday. Prepare the adjusting entries necessary for the year ended June 30, 20X8. What is Danza’s net income for 20X8?

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