Concept explainers
1.
Adjusting entries indicates those entries, which are passed in the books of accounts at the end of one accounting period. These entries are passed in the books of accounts as per the revenue recognition principle and the expenses recognition principle to adjust the revenue, and the expenses of a business in the period of their occurrence.
Adjusted
Adjusted trial balance is a trial balance prepared at the end of a financial period, after all the adjusting entries are journalized and posted. It is prepared to prove the equality of the total debit and credit balances.
Rule of Debit and Credit:
Debit - Increase in all assets, expenses & dividends, and decrease in all liabilities and
Credit - Increase in all liabilities and stockholders’ equity, and decrease in all assets & expenses.
To record: The adjusting entries on April 30, 2016 of R Repairs and Services.
1.
Explanation of Solution
a. Accrued fees unearned
Date | Account Titles and Explanation | Debit ($) | Credit ($) |
April, 30 | 9,850 | ||
2016 | Fees earned | 9,850 | |
(To record the accounts receivable at the end of the year.) |
Table (1)
The impact on the
Explanation:
- Accounts Receivable is an asset, and it is increased by $9,850. So debit Accounts receivable by $9,850.
- Fees earned are component of stockholders’ equity and increased it by $9,850. So credit fees earned by $9,850.
b.Supplies expense
Date | Account Titles and Explanation | Debit ($) | Credit ($) |
April, 30 | Supplies Expense (1) | 11,540 | |
2016 | Supplies | 11,540 | |
(To record the supplies expense at the end of the accounting period) |
Table (2)
The impact on the accounting equation for the above referred adjusting entry is as follows:
Explanation:
- Supplies expense is a component of stockholders’ equity, and it decreased the stockholders’ equity by $11,540. So debit supplies expense by $11,540.
- Supplies are an asset for the business, and it is decreased by $11,540. So credit supplies by $11,540.
Working Note:
Calculate the value of fees earned for the accounting period
c.
Date | Account Titles and Explanation | Debit ($) | Credit ($) |
April, 30 | Depreciation expense | 6,470 | |
2016 | |
6,470 | |
(To record the depreciation on office equipment for the current year.) |
Table (3)
The impact on the accounting equation for the above referred adjusting entry is as follows:
Explanation:
- Depreciation expense is component of stockholders’ equity and decreased it, so debit depreciation expense by $6,470.
- Accumulated depreciation is a contra asset account, and it decreases the asset value by $6,470. So credit accumulated depreciation by $6,470.
d. Unearned fees
Date | Account Titles and Explanation | Debit ($) | Credit ($) |
April, 30 | Unearned Fees | 15,000 | |
2016 | Fees earned | 15,000 | |
(To record the fees earned from services at the end of the accounting period.) |
Table (4)
The impact on the accounting equation for the above referred adjusting entry is as follows:
Explanation:
- Unearned fees are a liability, and it is decreased by $15,000. So debit unearned rent by $15,000.
- Fees earned are a component of Stockholders’ equity, and it is increased by $15,000. So credit rent revenue by $15,000.
e. Wages expense
Date | Account Titles and Explanation | Debit ($) | Credit ($) |
April, 30 | Wages expenses | 5,200 | |
2016 | Wages Payable | 5,200 | |
(To record the wages accrued but not paid at the end of the accounting period.) |
Table (5)
The impact on the accounting equation for the above referred adjusting entry is as follows:
Explanation:
- Wages expense is a component of Stockholders ‘equity, and it decreased it by $5,200. So debit wage expense by $5,200.
- Wages Payable is a liability, and it is increased by $5,200. So credit wages payable by $5,200.
2.
The revenues, expenses and net income of R Repairs and Services before adjusting entries
2.
Explanation of Solution
The revenues, expenses and net income before adjusting entries of R Repairs and Services are stated below:
- Revenue = $294,750 (given)
- Expenses = $226,350 (2)
- Net income = $68,400 (3)
Working Notes:
1. Calculate the expenses before adjusting entries:
2. Calculate the net income before adjusting entries
Hence, the revenues, expenses and net income of R Repairs and Services are $294,750, $226,350 and $68,400 respectively.
3.
The revenues, expenses and net income of R Repairs and Services after adjusting entries
3.
Explanation of Solution
The revenues, expenses and net income after adjusting entries of R Repairs and Services are stated below:
- Revenue = $319,600 (5)
- Expenses = $249,350 (4)
- Net income = $70,040 (6)
Working Notes:
1. Calculate expenses after adjusting entries:
2. Calculate the revenue after adjusting entries
3. Calculate the net income after adjusting entries
Hence, the revenues, expenses and net income of R Repairs and Services are $319,600, $249,560 and $70,040 respectively.
4.
The effect of the adjusting entries on the capital of K
4.
Explanation of Solution
The capital of K will be reduced by $1,640 after the adjusting entry.
Due to the adjusting entry, there is a decrease in the net income of $1,640
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