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zaheerswati@ciit.net.pk Adjustments (Solved)

60
Unit 6

1. Prepaid Insurance account began the year with a balance of $230. During the year, insurance in the amount of $570 was
purchased. At the end of the year March 31
st
, 2009 the amount of insurance still unexpired was $350. Prepare the year end
adjusting entry.
General Journal
Date Account Title and Explanations Ref
Amount
Debit Credit
2009
March 31 Insurance Expense 450
Prepaid Insurance 450



2. The depreciation expense on office equipment for the month of March is $50. This is the second month that the office
Equipment, which cost $950, has been owned. Prepare the adjusting entry for March and show the adjustment using
written down method (WDM) for depreciation recording.
General Journal
Date Account Title and Explanations Ref
Amount
Debit Credit
March 31 Dep. Expense_Office Equipment 50

50 Office Equipments



3. Wages are paid every Saturday for a five day work week (Mon Fri; two days are unpaid and free). Wages are $2,000
per week. Prepare the adjusting entry on June 30, assuming J uly 1 falls on a Wednesday.
General Journal
Date Account Title and Explanations Ref
Amount (Rs)
Debit Credit
Wages Expense 800
Wages Payable 800




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Unit 6

4. On July 3, a deposit in the amount of $5,000 was received for services to be performed. By the end of the month,
services in the amount of $1,200 were performed. Prepare journal entries for the original receipt of the deposit and the
adjusting entry on 31
st
July.
General Journal
Date Account Title and Explanations Ref
Amount
Debit Credit
July 3 Cash 5,000
Unearned Revenue 5,000

31 Unearned Revenue 1,200
Earned Revenue 1,200



5. On October 4, Smith Company rendered services valued at $11,000. The client will pay for the services November 1 and
closing are done at the end of each month pass this transaction at the end of period.
General Journal
Date Account Title and Explanations Ref
Amount
Debit Credit



31 Account Receivable 11,000
Services 11,000



6. At year end, property taxes expense for six months, estimated at $2,000, have accrued but have not been recorded. Prepare
the adjusting entry at year end (12/31).
General Journal
Date Account Title and Explanations Ref
Amount
Debit Credit
Dec 31 Taxes Expense 2,000
Taxes Payable 2,000


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Unit 6

7. The Supplies asset account began the year with a balance of $190. During the year, supplies in the amount of $490 were
purchased. At the end of the year the inventory of supplies on hand was $220. Prepare the year end adjusting entry.
General Journal
Date Account Title and Explanations Ref
Amount
Debit Credit
Supplies Expenses 460
Supplies Assets 460



8. At year end, unrecorded interest receivable fromthe US Government bonds is $1,700. Prepare the adjusting entry
General Journal
Date Account Title and Explanations Ref
Amount
Debit Credit
Interest Receivable 1,700

1,700 Interest



9. Bad Debts during the year were $ 1,500. Pass journal entry by using direct write off method for bad debt treatment.
General Journal
Date Account Title and Explanations Ref
Amount
Debit Credit
Bad Debts 1,500
Sundry Debtors 1,500


10. Prepare the journal entry for XYZ Company to record its $17,000 of Bad debt expense for the year 2009 by using
allowance method for bad debt treatment.
General Journal
Date Account Title and Explanations Ref
Amount
Debit Credit
Bad Debts 17,000
Allowance for Bad Debts 17,000

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Unit 6

11. During the year 2000, XYZ Company identified $16,000 of uncollectible Accounts receivable and wrote themoff.
Prepare the journal entry for XYZ Company to write off $16,000 of uncollectible Accounts receivable.
General Journal
Date Account Title and Explanations Ref
Amount
Debit Credit
Bad Debts 16,000
Allowance for Bad Debts 16,000
Allowance for Bad Debts 16,000
Account Receivable 16,000


12. Prepare the journal entries for ABC Company to record cash collections on Accounts receivable and to record recoveries
of Accounts receivable that had previously been written off. Included in the total cash collections during 2007 was $900
that represented collections of Accounts receivable that had previously been written off.
General Journal
Date Account Title and Explanations Ref
Amount
Debit Credit
Account Receivable 900
Allowance for Bad Debts 900
Cash 900
Account Receivable 900

13. On November 12, Smith Company received $8,000 in advance of services to be rendered over the next two months
($4,000 per month December and January). Prepare all the associated journal entries in regards to this business
transaction fromNovember 12, to January 31
st
, assuming that monthly closing is applicable.
General Journal
Date Account Title and Explanations Ref
Amount
Debit Credit
Nov 12 Cash 8,000
Unearned Services 8,000
Dec 31 Unearned Services 4,000
Earned Services 4,000
Jan 31 Unearned Services 4,000
Earned Services 4,000

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zaheerswati@ciit.net.pk Adjustments (Solved)

64
Unit 6

14. At year end, unrecorded interest expense due to creditors was $1,100 (payable in the next year). Prepare the adjusting entry
at year end (12/31).
General Journal
Date Account Title and Explanations Ref
Amount
Debit Credit
Dec 31 Interest Expense 4,000
Interest Payable
4,000




15. The Frontier Chip Company offers credit terms to its customers. At the end of 2009, accounts receivable totalled
$2,223,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible
accounts had a credit balance of $68,000 at the beginning of 2009 and $46,200 in receivables was written off during the
year as uncollectible. No previously written off receivables were collected. The company estimates bad debts by
applying a percentage of 3% to net accounts receivable at the end of the year.
General Journal
Date Account Title and Explanations Ref
Amount
Debit Credit
Allowance for Uncollectible 46,200
Account Receivable 46,200
Bad Debts 43,504
Allowance for Uncollectible 43,504



16. Collections on accounts receivable during the year were $70,000.
General Journal
Date Account Title and Explanations Ref
Amount (Rs)
Debit Credit
Cash 70,000
Account Receivable 70,000
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Unit 6


17. Wildwood, Incorporated, had net sales for the month of December, 2004 were $37,000. At December 31, before month-
end adjusting entries, the balances in selected accounts were: Accounts Receivable, $20,100 debit, and Allowance for
Doubtful Accounts, $12,800 credit. Record the bad debts write off for December under the assumption that 1% of its net
sales will prove to be uncollectible.
General Journal
Date Account Title and Explanations Ref
Amount (Rs)
Debit Credit
Allowance for Doubtful account 370
Account Receivable 370


18. Company reports the following financial information before adjustments.
Dr. Cr.
Accounts Receivable $100,000
Allowance for Doubtful Accounts $2,000
Sales (all on credit) 900,000
Sales Returns and Discount 50,000
Prepare the journal entry to record Bad Debt Expense assuming Company estimates bad debts at (a) 1% of net
sales and (b) 5% of net accounts receivable.
General Journal
Date Account Title and Explanations Ref
Amount (Rs)
Debit Credit
a Bad Debt Expense 6,500
Allowance for Bad Debts 6,500



b Bad Debt Expense 3,000
Allowance for Bad Debts 3,000


19. Salaries expense in Trial balance is $ 90,000. Salaries expense for whole year is to $ 72,000.
General Journal
Date Account Title and Explanations Ref
Amount (Rs)
Debit Credit
Prepaid Salaries 18,000
Salaries Expense 18,000

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Unit 6
20. Pass the necessary entries fromthe following information using provision method.

Trial Balance
Description Amount Description Amount
Sundry Debtors 40,600 Provision for Bad debts 1,500

Bad debts Rs. 600 after preparation of Trial Balance and create provision for bad debts @ 5% on sundry debtors.


General Journal
Date Account Title and Explanations Ref
Amount (Rs)
Debit Credit
a Bad Debt Expense 600
Sundry Debtors 600



b Profit and Loss account 500
Provision for bad debs 500



21. Pass the necessary entries from the following information using provision method.


Trial Balance
Description Amount Description Amount
Sundry Debtors 40,600 Provision for Bad debts 2,900

Bad debts Rs. 600 after preparation of Trial Balance and create provision for bad debts @ 5% on sundry debtors.


General Journal
Date Account Title and Explanations Ref
Amount (Rs)
Debit Credit
a Bad Debt Expense 600
Sundry Debtors 600



b Provision for bad debts 900
Profit and Loss account 900



22. Total sundry debtors in trial balance are Rs. 40,600, Bad debts Rs. 600 after preparation of Trial Balance and create
provision for bad debts @ 5% on sundry debtors and create provision for discount on sundry debtor @ 2 %.
General Journal
Date Account Title and Explanations Ref
Amount (Rs)
Debit Credit
Profit and Loss account 760
Provision for Discount on Debtor 760