Adjusting Journal Entries and Closing Journal Entries
What are the type of accounts that get closed at the end of the period called?
Temporary Accounts (Revenue, Expenses, Dividends)
What kind of account is the Sales Discount?
Contra Revenue
What type of account is the Allowance for Doubtful Accounts?
Contra Asset
A company buys shoes for $5,000 on October 1. They sell the shoes to customers for $7,000 on October 3 on account. What are the two journal entries on October 3?
Dr. A/R $7,000
Cr. Revenue $7,000
Dr. COGS $5,000
Cr. Inventory $5,000
What is the balance of a temporary account at the beginning of the fiscal year?
$0
Gilbert Gliders started business on June 1,2019. At that time, the company purchased $5,000 of supplies for cash. At the end of June, the supplies were counted and totaled $1,000. What is the adjusting journal entry on June 30, 2019?
Dr. Supplies Expense $4,000
Cr. Supplies $4,000
$0 + $5,000 - x = $1,000
A company collects $500 upfront from a customer for services they are going to provide next month. What is the journal entry the company records when they collect the $500?
Dr. Cash $500
Cr. Deferred Revenue $500
Company C uses the aging method. Beginning A/R is $10,000, ending A/R is $40,000. Beginning Allowance for Uncollectible Accounts is $100 and ending Allowance for Uncollectible Accounts is $500. They determine that $50 in accounts receivable needs to be written off. What is the journal entry for the write off?
Dr. Allowance for Uncollectible Accounts $50
Cr. A/R $50
When costs are decreasing, what inventory costing method will produce the highest Gross Profit?
LIFO
Tike and Trikes Co. has annual property taxes of $24,000. On December 31, 2019 they need to record the adjusting entry for property taxes from August through December that will be paid in January. What is the journal entry on December 31?
Dr. Property Tax Expense $10,000
Cr. Property Taxes Payable $10,000
$24,000/12 = $2,000 x 5 = $10,000
Company CDE declared and issued $15,000 of cash dividends during the year. What is the closing journal entry?
Dr. Retained Earnings $15,000
Cr. Dividends $15,000
Tombstone is a company that sells art to other local businesses. A customer came in to Tombstone and purchased art on May 30,“on account”. Tombstone sent the customer an invoice on June 5 and the customer paid for the art on July 10. Under accrual accounting, when should Tombstone recognize revenue from this sale?
May 30
Company D uses the percentage of sales method. Beginning A/R is $50,000, ending A/R is $20,000. Beginning Allowance for Uncollectible Accounts is $1,000 and ending Allowance for Uncollectible Accounts is $1,500. Credit sales for the year were $450,000. The company estimates 1% of credit sales will be uncollectible. What is the journal entry for bad debt expense?
Dr. Bad Debt Expense $4,500
Cr. Allowance for Uncollectible Accounts $4,500
BDE = $450,000 x .01 =$4,500
Given the following information for a company that uses LIFO cost flow:
Beg Inventory 200 units @ $1.20/unit
1st purchase 400 units @ $1.30/unit
2nd purchase 250 units @ $1.40/unit
Sales 550 units @ $2.00/unit
What is the ending inventory ($)?
$370
200 x $1.20 = $240
100 x $1.30 = $130
$370
A company has a balance of $50,000 in their revenue account, $30,000 in wages expense, and $10,000 in cost of goods sold at the end of the year. What are the two closing journal entries?
Dr. Revenue $50,000
Cr. Retained Earnings $50,000
Dr. Retained Earnings $40,000
Cr. Wages Expense $30,000
Cr. Cost of Goods Sold $10,000
On September 1, 2023, Winslow Transportation prepaid $3,500 for insurance coverage that covers September 1, 2023 and ends March 31, 2024.What journal entry would be needed on December 31, 2023, assuming no adjusting entries in prior months?
Dr. Insurance Expense $2,000
Cr. Prepaid Insurance $2,000
[3,500 x (4/7)= 2,000]
What-A-Deal Corporation repairs bikes. On April 15, they performed bike repair services of $50,000 to a customer for $10,000 cash and the remainder on account. What is the journal entry on April 15?
Dr. Cash $10,000
Dr. A/R $40,000
Cr. Service Revenue $50,000
Company F uses the percentage of receivables method. Beginning A/R is $50,000, ending A/R is $20,000. Beginning Allowance for Uncollectible Accounts is $1,000. Credit sales for the year were $450,000. Write-offs were $900. The company estimates 2% of ending A/R will be uncollectible. What is the journal entry for bad debt expense?
Dr. Bad Debt Expense $300
Cr. Allowance for Uncollectible Accounts $300
Ending A/R $20,000 x .02 = $400 (Ending Allowance)
$1,000 + X - $900 = $400
A company has the following products with unit costs recorded on the books. They determine the NRV of each product at the end of the year. What is the journal entry to adjust the value of the inventory?
Product A: 40 units with cost of $120/unit and NRV of $124/unit
Product B: 30 units with cost of $84/unit and NRV of $80/unit
Product C: 50 units with cost of $170/unit and NRV of $162/unit
Dr. COGS $520
Cr. Inventory $520
*Only adjust for Products B and C
($84-$80) x 30 = $120
($170-$162) x 50 = $400
Given the following information for a company that uses LIFO cost flow:
Beg Inventory 200 units @ $2/unit
1st purchase 150 units @ $2.10/unit
2nd purchase 110 units @ $2.15/unit
Sales 220 units @ $3.20/unit
What is the COGS for the year?
$467.50
110 x $2.15 = $236.50
110 x $2.10 = $231.00
$467.50
Gilbert Gliders employs workers who earn salaries totaling $4,500 per five-day work week. The employees worked from Monday, September 29, through Friday, October 3, and were paid $4,500 on Saturday, October 4. What adjusting journal entry is necessary on September 30?
Dr. Salaries Expense $1,800
Cr. Salaries Payable $1,800
$4500/5 = $900 x 2 days = $1,800
Monday Sept 29 and Tuesday Sept 30
In August, SD Theater Company collected $600,000 for season ticket packages for its 12 plays. Of the 12 plays, 3 are in September, 4 in October, 3 in November, and 2 in December. What is the ending balance of the deferred revenue account at October 31 (after all adjusting entries)?
$250,000
Beg $600,000
Earned: ($600,000/12 plays=$50,000) x 7 plays = $350,000
Remaining:$600,000 - $350,000 = $250,000
Alternatively: 5 plays remain x $50,000 = $250,000 left to earn
Company D uses the percentage of sales method. Beginning A/R is $50,000,ending A/R is $20,000. Beginning Allowance for Uncollectible Accounts is $1,000 and ending Allowance for Uncollectible Accounts is $1,500. Credit sales for the year were $450,000. The company estimates 1% of credit sales will be uncollectible. What were the cash collections for the year?
$476,000
BDE =$450,000 x .01 = $4,500
$1,000 + $4,500 - Writeoffs = $1,500
Writeoffs = $4,000
$50,000 + $450,000 - Cash Collected - $4,000 = $20,000
Cash Collected = $476,000
Given the following information for a company that uses weighted average cost flow:
Beg Inventory 200 units @ $1.20/unit
1st purchase 400 units @ $1.30/unit
2nd purchase 250 units @ $1.40/unit
Sales 550 units @ $2.00/unit
What is the ending inventory ($) on the balance sheet? Do not round intermediate calculations. Round your ending answer to nearest whole dollar.
$392 [also take $390, $391 or $393]
Total cost of goods available for sale = $1,110 [(200 x $1.20) + (400 x $1.30) + (250 x $1.40)]
Total Units = 200 + 400 + 250 = 850
Weighted Average Cost = $1,110 / 850 units = $1.30588 weighted-average cost per unit.
E/I = $1.30588 x 300 = $392 (rounded to nearest dollar)
Given the following information for a company that uses FIFO cost flow:
Beg Inventory 200 units @ $1.20/unit
1st purchase 400 units @ $1.30/unit
2nd purchase 250 units @ $1.40/unit
Sales 550 units @ $2.00/unit
What is the gross profit on the income statement?
$405
Revenue = 550 x $2.00 = $1,100
COGS = [(200 x $1.20) + (350 x $1.30)] = $695
$1,100 – $695 = $405