Accounting

Adjusting Entries
Data for original entries and date for adjusting entries.
• June 30, 2006 Love Thy Pet Inc,. paid $19,200 cash to the rental company for the
next 12 months rent.

• December 31, 2006 Adjusted the amount of rent used during the period between
June 30 and December 31.

• June 28, 2006 Received $5,000 cash for two bulldogs to be delivered within the next
year by a breeder.
• December 31, 2006 Record revenues earned during the past six months. One of the
bull doges was delivered by the breeder
• June 6, 2006 Love Thy Pet Inc,. purchased office equipment for $15,000 cash with an
estimated usefully life of 5 years. The residual value of the equipment is expected to
be $3,000.
• December 31, 2006 Record depreciation for office equipment. Time period is June 6,
2006 to December 31, 2006. Love Thy Pet uses the straight-line method of
depreciation.
• June 1, 2006 The Hatfield Company borrowed $10,000 for Love Thy Pet Inc,. The
note is for 1 year and has an interest rate of 6%.
• December 31, 2006 Record the accrued interest for the Hatfield Company’s Notes
receivable. The time period is from June 1, 2006 to December 31, 2006. Use the
simple interest method.
• December 31, 2006 Two employees are paid in total $800 each bi-week to be paid
evenly over a 5 day work week. What would be the accrued expense for employees?
 Types of Adjustments
Prepayments:
Prepaid Expenses
Unearned Revenues
Depreciation

Accruals:
Accrued Revenues
Accrued Expenses
 Prepayments
Types of Adjustments:
Prepaid Expenses
Unearned Revenues
Depreciation
 Prepaid Expense
Original Journal Entry

June 30, 2006 Love Thy Pet Inc,. paid $19,200 cash to
the rental company for the next 12 months rent.
 Prepaid Expenses
Original Ledger Entries

June 30, 2006 Love Thy Pet Inc,. paid $19,200 cash
to the rental company for the next 12 months rent.
 Prepaid Expense
Adjusting Journal Entry

December 31, 2006 Adjusted the amount of rent used

during the period between June 30 and December 31.
19,200 X 6/12 = 9,600
 Prepaid Expenses
Adjusting Ledger Entries

December 31, 2006 Adjusted the amount of rent used during

the period between June 30 and December 31.
19,200 X 6/12 = 9,600
 Unearned Revenue
Original Journal Entry

June 28, 2006 Received $5,000 cash for two bulldogs to

be delivered within the next year by a breeder.
 Unearned Revenue
Original Ledger Entries

June 28, 2006 Received $5,000 cash for two bulldogs to

be delivered within the next year by a breeder.
 Unearned Revenue
Adjusting Journal Entry

December 31, 2006 Record revenues earned during the

past six months. One of the bull doges was delivered by the
breeder
 Unearned Revenue
Adjusting Ledger Entries

December 31, 2006 Record revenues earned during

the past six months. One of the bull doges was
delivered by the breeder
 Depreciation
Original Journal Entry

June 6, 2006 Love Thy Pet Inc,. purchased office equipment

for $15,000 cash with an estimated usefully life of 5 years.
The residual value of the equipment is expected to be
$3,000.
 Depreciation
Original Ledger Entries

June 6, 2006 Love Thy Pet Inc,. purchased office

equipment for $15,000 cash with an estimated usefully life
of 5 years. The residual value of the equipment is expected
to be $3,000.
 Depreciation
Adjusting Journal Entry

December 31, 2006 Record depreciation for office

equipment. Time period is June 6, 2006 to December 31,
2006. Love Thy Pet uses the straight-line method of
depreciation.
$15,000 – 3,000 = 12,000 / 5 = 2,400 X 7/12 = 1,400
 Depreciation
Adjusting Ledger Entries

December 31, 2006 Record depreciation for office

equipment. Time period is June 6, 2006 to December 31,
2006. Love Thy Pet Inc,. uses the straight-line method of
depreciation.
$15,000 – 3,000 = 12,000 / 5 = 2,400 X 7/12 = 1,400
 Accruals
Types of Adjustments:
Accrued Revenues
Accrued Expenses
 Accrued Revenue
Original Journal Entry

June 1, 2006 The Hatfield Company borrowed $10,000 for

Love Thy Pet Inc,. The note is for 1 year and has an interest
rate of 6%.
 Accrued Revenue
Original Ledger Entries

June 1, 2006 The Hatfield Company borrowed $10,000 for

Love Thy Pet Inc,. The note is for 1 year and has an
interest rate of 6%.
 Accrued Revenue
Adjusting Journal Entry

December 31, 2006 Record the accrued interest for the Hatfield
Company’s Notes receivable. The time period is from June 1,
2006 to December 31, 2006. Use the simple interest method.
10,000 X .06 = 600 X 7/12 = 350
 Accrued Revenue
Adjusting Ledger Entries

December 31, 2006 Record the accrued interest for the Hatfield
Company’s Notes receivable. The time period is from June 1,
2006 to December 31, 2006. Use the simple interest method.
10,000 X .06 = 600 X 7/12 = 350
 Accrued Expense
Salary Expense Calendar for December
20XX
SUN MON TUE WED THUR FRI SAT

1 2 3 4
Pay Day
5 6 7 8 9 10 11

12 13 14 15 16 17 18
Pay Day
19 20 21 22 23 24 25

26 27 28 29 30
 Accrued Expense
Adjusting Journal Entry

December 31, 2006 Two employees are paid in total $800

each bi-week to be paid evenly over a 5 day work week.
What would be the accrued expense for employees?
1600 X 9/10 = 1440
 Accrued Expense
Adjusting Ledger Entries

December 31, 2006 Two employees are paid in total $800

each bi-week to be paid evenly over a 5 day work week.
What would be the accrued expense for employees?
1600 X 9/10 = 1440
Additional Information that can be used to practice adjusting
entries. Use this information to practice adjusting entries not
show in this slide show demonstration.

Data from original entries and date for adjusting entries.

• January 31, 2006 Marie purchased a two-year insurance policy costing

$2,400 that will expire January 31, 2008.
• December 31, 2007 record the use of the insurance policy up to December
31, 2007.
• January 5, 2006 Marie purchased pet store equipment for $7,500 in cash.
• February 1, 2006 Marie purchased and placed into use pet store equipment
for $30,000 and took out a $50,000 note with terms of 1 year at 6%.
• December 31, 2006 Accrue interest on notes payable.
• December 31, 2006 record depreciation on pet store equipment. Straight
line method of depreciation is used.