Adjusting Journal Entries
When are adjusting journal entries recorded?
End of month, End of quarter, End of year,....
What are the type of accounts that get closed at the end of the period called?
Temporary Accounts
What kind of account is the Allowance for Uncollectible Accounts?
Contra Asset
What is the formula for A/R, net?
Gross A/R less Allowance for Uncollectible Accounts
Which company is better at managing receivables? Company A with a receivables turnover ratio of 3.5 or Company B with a receivables turnover ratio of 5?
Company B
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
What is the balance of a temporary account at the beginning of the fiscal year?
$0
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 is $100 and Ending Allowance 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
Which of the allowance methods is known as the income statement approach?
Percentage of Sales
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]
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 is $1,000 and Ending Allowance 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 this information what is the bad debt expense journal entry for 2019?
A/R on Jan 1,2019 $150,000
Credit sales during 2019 $1,000,000
Collections from credit customers in 2019 $800,000
Accounts written off in 2019 $5,000
Allowance on Jan 1, 2019 $10,000
Allowance on Dec 31, 2019 $30,000
Dr. Bad Debt Expense 25,000
Cr. Allowance for Uncollectible Accounts 25,000
10,000 Beg Allowance + X Bad Debt Expense - 5,000 Write Offs = 30,000 End Allowance
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 months = 10,000
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
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 ADA 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)
Ending Allowance 400 + Writeoffs 900 - Beginning Allowance 1,000 = 300 Bad Debt Expense
Merchandise with a sales price of $500 is sold on account with terms 2/10, n/30 on March 1. If the payment is received on March 5, what is the journal entry on March 5?
Dr. Cash 490
Dr. Sales Discount 10
Cr. A/R 500
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 = 1800
A company has revenues of $55,000, dividends of $3,000, and net income of $30,000. What is the closing journal entry for expenses?
Dr. Retained Earnings 25,000
Cr. Expenses 25,000
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 is $1,000 and Ending Allowance 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
Beg Allowance 1,000 + BDE 4,500 - Ending Allowance 1,500= 4,000 Writeoffs
Beg A/R 50,000 + Sales on Credit 450,000 - Writeoffs 4,000 - Ending A/R 20,000 = 476,000
Given the below information, what is the A/R, net at December 31, 2019?
A/R on Jan 1,2019 $150,000
Credit sales during 2019 $1,000,000
Collections from credit customers in 2019 $800,000
Accounts written off in 2019 $5,000
Allowance on Jan 1,2019 $10,000
Allowance on Dec 31,2019 $30,000
$315,000
150,000 Beg A/R + 1,000,000 Sales on Credit - 800,000 Cash Collections - 5,000 Write-Offs = 345,000 End A/R
A/R, Net:345,000 - 30,000