Financial Statements
What accounts are included in the Balance Sheet?
Assets
Liabilities
SHE
Cash: Type of account and Normal balance
Asset, debit
Journalize the purchase $2400 of equipment on account
Eq. 2400 (debit)
AP 2400 (credit)
The company reports a balance in supplies of 500. During the year they purchased supplies for 3,300 with cash. At the end of the year, 300 dollars worth of supplies remain.
What is the adjusting entry? (HINT: adj. entries record the amount USED)
Important Info:
- Started with 500
- Added 3,300
- Remaining 300
- How much was used? 3500
Adjusting Entry: debit supplies expense and credit supplies for 3500
What is included in the temporary accounts?
Revenues
Expenses
Dividends
What accounts are included in the Net Income Statment?
Revenues
Expenses
Dividends
Deferred Revenue: Type of account, Normal balance
Liability, Credit
Journalize:
Toys R’ Us fixes a customer’s toy for $3000. Half of this service is paid for with cash and
another half is billed to the customer.
Cash 1500
Accounts Receivable 1500
Revenue 3000
Lula prepays for the rent of her apartment at a total of $3200 for November 1 to February 28. What is the adjusting entry on December 31?
Accrued Rent Expense:
Total prepay: 3200
How many months am I paying for in total? (4)
How many months until Dec. 31? (2)
Prepay in dollars * (months until dec 31 / months I am paying for)
3200 * (2/4) = $1600 prepay consumed by Dec. 31
Rent EXPENSE 1600
Rent PAYABLE = 1600
What is included in the permanent accounts?
Assets
Liabilities
SHE
What accounts are included in the retained earnings statement?
Beginning RE
(add) Net Income
(less) Dividends Paid
Dividends
SHE, Debit
Is this a debit or credit balance?
CASH
debit credit
-------- --------
500 350
100
500 - 350 + 100 = 250 (debit)
Lula’s Advertising signed a 3 month note payable in the amount of 3,000 on October 1. The annual interest rate is 8%. What is the adjusting entry on October 31.
HINT: Face Value of Note x Annual Interest Rate x Time in Terms of 1 Year = Interest
Face amount x interest rate x 1/12 (it's paid monthly)
3000 x .08 x 1/12 =
Interest Expense 20
Interest Payable 20
Dividends: 200
Close the dividend account (to RE).
(Hint: what is the normal balance for dividends?)
Credit Dividends 200
** dividends have a debit balance, so closing it would place it on the credit side
Your beginning RE of 2,000. Your revenues are 50,000. Your expenses are 48,000. What is the ending RE? (Zero dividends were paid.)
NI = 50,000 - 48,000
2000 + 2000 - 0 = 4000
Prepaid Insurance
Asset, Debit
Is this a debit or credit balance?
SERVICE REVENUE:
debit credit
------- -------
5000
6000 2000
5000 - 6000 + 2000 = 1000 (credit)
Lula’s paid salaries on October 26 for the first two weeks (October 15-26). The next payment will not occur until November 9. Employees’ total salaries are 1,000 for a 5 day work week, or $200 a day. What are the accrued salaries on October 31?
Note:
October 26 is a Friday.
How many days are left in October?
(HINT: accrued includes revenues and expenses, which one is used here? Also, the company OWES the employees money)
● Oct. 29 - 31 is Monday, Tuesday, Wednesday; $200 x 3 = $600 October 31
Salaries and Wages Expense 600
Salaries and Wages Payable 600
Service Revenue: 15,000
Rent Revenue: 4,400
Close the revenue accounts.
(Hint: what is the normal balance for revenues)
Debit SR 15,000
Debit RR 4,400
Credit RE 19,400
** revenues have a normal balance of credit, closing these require them to be debited
What accounts are included in the Stockholders' Equity Statement?
Retained Earnings
Common Stock
(add) NI
(less) dividends
Retained Earnings
SHE, Credit
cash
accounts receivable
accounts payable
common stock
retained earnings
AR (300 debit)
AP (100 credit)
CS (200 credit)
RE (400 credit)
debit = 700, credit = 700
The company bought equipment for 50,400 on April 1. At time of purchase, the equipment is expected to be in operation for 7 years - no resale or scrap value at the end. Equipment depreciate evenly over the 84 months.
What is the adjusting entry? (HINT: this is a monthly use; adj. entries answer how much is used?)
Adjusting Entry for April 30:
- Debit depreciation expense for 600 ( 1 month x 600)
- Credit accumulated depreciated for 600 (1 month x 600)
Interest expense: $50
Depreciation expense: $40
Insurance expense: $50
Rent expense: $900
Close the expenses.
(Hint: what is the normal balance for expenses?)
Debit RE 6240
Credit each expense for their amount
** expenses have debit balances