1 The Adjusting Process 3 Student Version. 1-2 3-2 2 Describe the nature of the adjusting process. 1...
-
Upload
lisa-elliott -
Category
Documents
-
view
225 -
download
1
Transcript of 1 The Adjusting Process 3 Student Version. 1-2 3-2 2 Describe the nature of the adjusting process. 1...
1
The Adjusting Process
3
Student Version
1-23-22
Describe the nature of the adjusting process.
1
3-2
1-33-33
Prepaid expenses are the advance payment of future expenses and are recorded as assets when cash is paid.
1
Types of Accounts Requiring Adjustment
1-43-44
Unearned revenues are the advance receipt of future revenues and are recorded as liabilities when cash is received.
Types of Accounts Requiring Adjustment
1
1-53-55
Accrued revenues are unrecorded revenues that have been earned and for which cash has yet to be received.
1
Types of Accounts Requiring Adjustment
1-63-66
Accrued expenses are unrecorded expenses that have been incurred and for which cash has not been paid.
1
Types of Accounts Requiring Adjustment
1-73-77
Journalize entries for accounts requiring adjustment.
2
3-7
1-83-8
Summary of Basic AdjustmentsSummary of Basic AdjustmentsSummary of Basic AdjustmentsSummary of Basic Adjustments
1-93-99
NetSolutions’ Supplies account has a balance of $2,000 in the unadjusted trial balance. Some of these supplies have been used. On December 31, a count reveals that $760 of supplies are on hand.
Prepaid Expenses
2
Supplies (balance on trial balance) $2,000Supplies on hand, December 31 – 760Supplies used $1,240
1-103-1010
Dec. 31 1,240Dec. 31 1,240
SuppliesBal. 2,000
Supplies ExpenseBal. 800
14 55
2,040760
2
1-113-11
Effect of Omitting AdjustmentEffect of Omitting AdjustmentEffect of Omitting AdjustmentEffect of Omitting Adjustment
1-123-1212
The debit balance of $2,400 in NetSolutions’ Prepaid Insurance account represents the December 1 prepayment of insurance for 12 months.
Prepaid Expenses
2
1-133-1313
Dec. 31 200Prepaid InsuranceBal.
2,400
Insurance Expense15 56
2,200
2
Dec. 31 200
1-143-1414
The December 31 unadjusted trial balance of NetSolutions indicates a balance in the unearned rent account of $360.
Unearned Revenues
2
1-153-1515
Dec. 31
120
Unearned RentBal. 360
Rent Revenue23 42
2
1-163-1616
Rent Revenue 42Dec. 31
120
Unearned RentBal. 360
23
240Bal.
Dec. 31
120
2
1-173-17
Effect of Omitting AdjustmentEffect of Omitting AdjustmentEffect of Omitting AdjustmentEffect of Omitting Adjustment
1-183-1818
NetSolutions signed an agreement with Danker Co. on December 15 to provide services at $20 per hour. As of December 31, NetSolutions had provided 25 hours of assistance.
Accrued Revenues
2
1-193-1919
Dec. 31 500
Accounts ReceivableBal. 16,340
Fees Earned12 41Bal. 2,220
2,720Bal.
2
1-203-2020
Dec. 31 500Dec. 31 500
Accounts ReceivableBal. 16,340
Fees Earned12 41Bal. 2,220
2,720Bal. 16,840Bal.
2
1-213-21
Effect of Omitting AdjustmentEffect of Omitting AdjustmentEffect of Omitting AdjustmentEffect of Omitting Adjustment
1-223-2222
NetSolutions pays it employees biweekly. During December, NetSolutions paid wages of $950 on December 13 and $1,200 on December 27. As of December 31, NetSolutions owes $250 of wages to employees for Monday and Tuesday.
Accrued Expenses
2
1-233-2323
Dec. 31 250
Wages Payable Bal.
4,275
Wages Expense22 51
Bal. 4,525
2
1-243-2424
Dec. 31 250Dec. 31 250
Wages Payable Bal.
4,275
Wages Expense22 51
Bal. 4,525
2
1-253-2525
The journal entry for the payment of wages on January 10 is shown below.
2
After posting
1-263-26
Effect of Omitting AdjustmentEffect of Omitting AdjustmentEffect of Omitting AdjustmentEffect of Omitting Adjustment
1-273-2727
NetSolutions estimates the depreciation on its office equipment to be $50 for the month of December.
2
1-283-2828
Dec. 31 50Depreciation Expense Accum. Depr.—Office Equip. 1953
2
1-293-2929
Dec. 31 50Depreciation Expense
Dec. 31 50Accum. Depr.—Office Equip. 1953
2
1-303-3030
NetSolutions’ balance sheet would show office equipment at cost, less accumulated depreciation.
Office equipment $1,800 Less accumulated depreciation 50 $1,750
Book value
2
1-313-3131
Summarize the adjustment process.
3
3-26
1-323-3232
3
(continued)
Exhibit 7 Adjusting Entries—NetSolutions
1-333-3333
3
.
Exhibit 7 Adjusting Entries—NetSolutions (continued)
1-343-3434
Prepare an adjusted trial balance.
4
3-29
1-353-3535
4
Exhibit 9 Adjusted Trial Balance—NetSolutions
1-363-3636