Ch 3 The Adjusting Process

If a journal entry and posting for the use of office supplies during the year is accidentally omitted, what would be the impact on the financial statements?

By accidentally omitting an adjusting entry for the use of supplies, you would be omitting a debit to Supplies Expense (which if omitted Net Income would be overstated and Expenses would be understated) and you would be omitting a credit to Office Supplies (which if omitted the Balance Sheet Assets would be overstated).

If a journal entry and posting for the use of one month of rent from the prepaid rent account during the year is accidently omitted, what would be the impact on the financial statements?

By accidently omitting an adjusting entry for the use of the one month of rent from the prepaid rent account, you would be omitting a debit to Rent Expense (which if omitted Net Income would be overstated and Expenses would be understated) and you would be omitting a credit to Prepaid Rent (which if omitted the Balance Sheet Assets would be overstated).

an example of a deferral​ (or prepaid) adjusting​ entry?

Recording the usage of office supplies during the period.

Assume the weekly payroll of the Abbott Company is $5,000. December 31, the end of the year, falls on a Wednesday and Abbott will pay its employee on Friday for the full week. What adjusting entry will Abbott make on Wednesday, December 31 (Use five days as a full work week)?

Salaries earned are $1,000 per day ($5,000 / 5 day work week = $1,000 per day). If December 31 is on a Wednesday, then three days' worth of salaries are an expense as of that date, but not paid yet. Therefore, three days' worth of salaries, which is $3,000 (3 days * $1,000 = $3,000), needs to be recorded as a Salaries Expense (debit) and Salaries Payable (credit) on December 31.

The purpose of adjusting entries is to __________.

The purpose of adjusting entries is to update accounts to reflect the correct balances at the end of each period by matching revenues and expenses to the correct periods.

A piece of equipment purchased cost $10,000 and has depreciation expense of $2,000 for this year. What is the journal entry to record the depreciation expense for the year?

When journalizing for depreciation, the amount of Depreciation Expense is debited, and Accumulated Depreciation is credited. Depreciation Expense is included on the Income Statement; Accumulated Depreciation will appear as a contra asset on the Balance Sheet.

Jones Company received $2,200 in cash during March for Service Revenue for a job that will be completed in May. This job would be completed before the end of the year when the finance's are prepared. Since it is short lived and will be earned during this accounting period, Jones Company decided to record it as revenue instead of a liability at the time the cash was received in March. The journal entry to record this transaction when we received the cash in March would be:

When receiving cash in advanced for future revenues, but the revenues will be earned within the same accounting period, you can record the transaction as a credit to Service Revenue at the time the cash is received instead of as a liability (unearned).

Jones Company paid $1,200 with cash this year in January for six months rent. Therefore, it will be used up before the end of the year when the financials are prepared. Since it is short lived and will be used up during this accounting period, Jones Company decided to record it as an expense instead of an asset at the time of payment. The journal entry to record this transaction when Jones Company pays the cash for the six months rent would be:

When the prepaid rent is used within the same accounting period, you can record the transaction as a debit to Rent Expense at the time the cash is paid instead of as an Asset to Prepaid Rent. Since it was paid in cash, the credit entry is to cash (cash decreases).

On the worksheet, the Service Revenue account has a credit balance of $20,000 on the Unadjusted Trial Balance. In the Adjustments there is a credit of $2,000. What is the amount for Service Revenue in the Adjusted Trial Balance?

When you have a credit balance and a credit adjustment, you add the amounts together (20,000 + 2,000 = $22,000) for the Adjusted Trial Balance.