AC 210 Lecture Notes - Lecture 19: Financial Statement, Expense

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silvercicada472

5 Jun 2018

School

University of Alabama

Department

Accountancy

Course

AC 210

Professor

Lisa Mc Kinney

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Reversing Entries

At the beginning of each accounting period, some accountants use reversing

entries to cancel out the adjusting entries that were made to accrue revenues and

expenses at the end of the previous accounting period. Reversing entries make it easier

to record subsequent transactions by eliminating the need for certain compound entries.

Suppose Mr. Green makes an adjusting entry at the end of April to account for $80 in

unpaid wages. This adjustment involves an $80 debit to the wages expense account

and an $80 credit to the wages payable account.

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If Mr. Green does not reverse the adjusting entry, he must remember that part of May's

first payroll payment (for work completed in April) has already been recorded in the

wages payable and wages expense accounts. Assuming Mr. Green pays $200 in wages

on May 10, he makes a compound entry that decreases (debits) wages payable to $0,

increases (debits) wages expense by an amount equal to the wage expenses for May 1

through May 10, and decreases (credits) cash for an amount equal to the total payment.

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Document Summary

At the beginning of each accounting period, some accountants use reversing entries to cancel out the adjusting entries that were made to accrue revenues and expenses at the end of the previous accounting period. Reversing entries make it easier to record subsequent transactions by eliminating the need for certain compound entries. Suppose mr. green makes an adjusting entry at the end of april to account for in unpaid wages. This adjustment involves an debit to the wages expense account and an credit to the wages payable account. If mr. green does not reverse the adjusting entry, he must remember that part of may"s first payroll payment (for work completed in april) has already been recorded in the wages payable and wages expense accounts. To avoid the need for a compound entry, mr. green may choose to reverse the april 30 adjustment for accrued wages when the may accounting period begins.

Related Questions

Reliable Repairs & Service, an electronics repair store, prepared the following unadjusted trial balance at the end of its first year of operations:

Reliable Repairs & Service

UNADJUSTED TRIAL BALANCE

April 30, 2016

	ACCOUNT TITLE	DEBIT	CREDIT
1	Cash	10,350.00
2	Accounts Receivable	67,500.00
3	Supplies	16,200.00
4	Equipment	116,100.00
5	Accounts Payable		15,750.00
6	Unearned Fees		18,000.00
7	Karin Bickle, Capital		121,500.00
8	Karin Bickle, Drawing	13,500.00
9	Fees Earned		294,750.00
10	Wages Expense	94,500.00
11	Rent Expense	72,000.00
12	Utilities Expense	51,750.00
13	Miscellaneous Expense	8,100.00
14	Totals	450,000.00	450,000.00

For preparing the adjusting entries, the following data were assembled:

a.	Fees earned but unbilled on April 30 were $9,850.
b.	Supplies on hand on April 30 were $4,660.
c.	Depreciation of equipment was estimated to be $6,470 for the year.
d.	The balance in unearned fees represented the April 1 receipt in advance for services to be provided. During April, $15,000 of the services were provided.
e.	Unpaid Wages accrued on April 30 were $5,200.

	Required:
1.	Journalize the adjusting entries necessary on April 30, 2016. Refer to the Chart of Accounts for exact wording of account titles.
2.	Determine the revenues, expenses, and net income of Reliable Service & Repairs before the adjusting entries.
3.	Determine the revenues, expenses, and net income of Reliable Service & Repairs after the adjusting entries.
4.	Determine the effect of the adjusting entries on Karin Bickle, Capital.

Chart of Accounts

CHART OF ACCOUNTS

Reliable Repairs & Service

General Ledger

	ASSETS
11	Cash
12	Accounts Receivable
13	Supplies
16	Equipment
17	Accumulated Depreciation-Equipment

	LIABILITIES
21	Accounts Payable
22	Wages Payable
23	Unearned Fees

	EQUITY
31	Karin Bickle, Capital
32	Karin Bickle, Drawing

	REVENUE
41	Fees Earned

	EXPENSES
51	Wages Expense
52	Rent Expense
53	Supplies Expense
54	Depreciation Expense
56	Utilities Expense
59	Miscellaneous Expense

Journal

1. Journalize the adjusting entries necessary on April 30, 2016. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1		Adjusting Entries
2
3
4
5
6
7
8
9
10
11

Final Questions

2. Determine the revenues, expenses, and net income of Reliable Service & Repairs before the adjusting entries.

Before Adjusting Entries

1	Revenues
2	Expenses
3	Net income

3. Determine the revenues, expenses, and net income of Reliable Service & Repairs after the adjusting entries.

After Adjusting Entries

1	Revenues
2	Expenses
3	Net income

4. Determine the effect of the adjusting entries on Karin Bickle, Capital.

The capital account by

blushleopard138

Reliable Repairs & Service, an electronics repair store,prepared the following unadjusted trial balance at the end of itsfirst year of operations:

Reliable Repairs & Service

UNADJUSTED TRIAL BALANCE

April 30, 2016

	ACCOUNTTITLE	DEBIT	CREDIT
1	Cash	10,800.00
2	Accounts Receivable	67,270.00
3	Supplies	16,390.00
4	Equipment	115,170.00
5	Accounts Payable		15,830.00
6	Unearned Fees		17,930.00
7	Karin Bickle, Capital		117,930.00
8	Karin Bickle, Drawing	13,860.00
9	Fees Earned		297,710.00
10	Wages Expense	94,430.00
11	Rent Expense	71,780.00
12	Utilities Expense	52,100.00
13	Miscellaneous Expense	7,600.00
14	Totals	449,400.00	449,400.00

For preparing the adjusting entries, the following data wereassembled:

a.	Fees earned but unbilled on April30 were $9,950.
b.	Supplies on hand on April 30 were$4,810.
c.	Depreciation of equipment wasestimated to be $6,130 for the year.
d.	The balance in unearned feesrepresented the April 1 receipt in advance for services to beprovided. During April, $15,250 of the services were provided.
e.	Unpaid Wages accrued on April 30were $5,100.

	Required:
1.	Journalize the adjustingentries necessary on April 30, 2016. Refer to the Chart of Accountsfor exact wording of account titles.
2.	Determine the revenues,expenses, and net income of Reliable Service & Repairs beforethe adjusting entries.
3.	Determine the revenues,expenses, and net income of Reliable Service & Repairs afterthe adjusting entries.
4.	Determine the effect of the adjusting entries on KarinBickle, Capital. Can you explain in detail on how you Determine the revenues,expenses, and net income of Reliable Service & Repairs beforethe adjusting entries. Determine the revenues, expenses, and netincome of Reliable Service & Repairs after the adjustingentries.

ceriserhinoceros593

Part A

The following account balances pertain to the Jasper Manufacturing Co. at December 31, 20X3 (before adjusting entries).

	Debit	Credit
Cash ................................................................................	$300,000
Prepaid Insurance .............................................................	50,000
Land ................................................................................	400,000
Accounts Payable .............................................................		30,000
Common Stock .................................................................		250,000
Retained Earnings .............................................................		150,000
Service Revenue ...............................................................		650,000
Wages Expense .................................................................	150,000
Rent Expense ...................................................................	180,000
Total ................................................................................	$1,080,000	$1,080,000

Additional information:

(a)	Prepaid insurance in the trial balance represents an advance payment for 5 months of insurance made on November 1, 20X3.
(b)	In July, the accountant debited accounts payable for a $10,000 fine for a pollution violation; âEnvironmental Expenseâ should have been debited.
(c)	Rent expense in the trial balance represents an advance payment for 6 months rent paid on October 1, 20X3. The Company begins occupying the property on that date.
(d)	Unpaid and unrecorded wages earned by employees at December 31, 20X3, were $60,000.
(e)	Accrue income taxes for 20X3 at 30% on pretax income.

Required:

(1) Prepare adjusting entries to Jasper Co.'s accounts at December 31, 20X3. Each entry should be made in general journal format. Identify each entry by using the letter of the paragraph containing the additional information for the entry.

(2) Prepare the current year income statement

(3) Prepare the current year balance sheet.

(4) Prepare the closing entries.

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AC 210 Lecture Notes - Lecture 19: Financial Statement, Expense

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