The journal entry to record the purchase of the advertising supplies on October 5 is:
Debit Advertising Supplies 25,000
Credit Accounts Payable 25,000
This records the purchase of the supplies as an asset and the corresponding liability to the supplier.
The journal entry to record the purchase of the advertising supplies on October 5 is:
Debit Advertising Supplies 25,000
Credit Accounts Payable 25,000
This records the purchase of the supplies as an asset and the corresponding liability to the supplier.
The journal entry to record the purchase of the advertising supplies on October 5 is:
Debit Advertising Supplies 25,000
Credit Accounts Payable 25,000
This records the purchase of the supplies as an asset and the corresponding liability to the supplier.
The journal entry to record the purchase of the advertising supplies on October 5 is:
Debit Advertising Supplies 25,000
Credit Accounts Payable 25,000
This records the purchase of the supplies as an asset and the corresponding liability to the supplier.
The At the End Accounting of the Year Processing Close Temporary Post-Closing Cycle Accounts Trial Balance Slide 3-5 Slide 3-6 Slide 3-7 Slide 3-8 2. Posting 1. October 1: Shareholders invest $100,000 cash in an advertising venture to be known as Pioneer Advertising Agency Inc.
Cash Share Capital - Ordinary
Debit Credit Debit Credit
Slide LO 4 Record transactions in journals, post to
3-9 ledger accounts, and prepare a trial balance. 2. Posting 2. October 1: Pioneer Advertising purchases office equipment costing $50,000 by signing a 3-month, 12%, $50,000 note payable.
Office Equipment Notes Payable
Debit Credit Debit Credit
Slide LO 4 Record transactions in journals, post to
3-10 ledger accounts, and prepare a trial balance. 2. Posting 3. October 2: Pioneer Advertising receives a $12,000 cash advance from KC, a client, for advertising services that are expected to be completed by December 31. Illustration 3-11
Cash Unearned Service Revenue
Debit Credit Debit Credit 100,000
Slide LO 4 Record transactions in journals, post to
3-11 ledger accounts, and prepare a trial balance. 2. Posting 4. October 3: Pioneer Advertising pays $9,000 office rent, in cash, for October.
Cash Rent Expense
Debit Credit Debit Credit 100,000 12,000
Slide LO 4 Record transactions in journals, post to
3-12 ledger accounts, and prepare a trial balance. 2. Posting 5. October 4: Pioneer Advertising pays $6,000 for a one-year insurance policy that will expire next year on September 30.
Cash Prepaid Insurance
Debit Credit Debit Credit 100,000 9,000 12,000
Slide LO 4 Record transactions in journals, post to
3-13 ledger accounts, and prepare a trial balance. 2. Posting 6. October 5: Pioneer Advertising purchases, for $25,000 on account, an estimated 3-month supply of advertising materials from Aero Supply.
Advertising Supplies Accounts Payable
Debit Credit Debit Credit
Slide LO 4 Record transactions in journals, post to
3-14 ledger accounts, and prepare a trial balance. 2. Posting 7. October 9: Pioneer Advertising signs a contract with a local newspaper for advertising inserts (flyers) to be distributed starting the last Sunday in November. Pioneer will start work on the content of the flyers in November. Payment of $7,000 is due following delivery of the Sunday papers containing the flyers. Illustration 3-15
Slide LO 4 Record transactions in journals, post to
3-15 ledger accounts, and prepare a trial balance. 2. Posting 8. October 20: Pioneer Advertising’s board of directors declares and pays a $5,000 cash dividend to shareholders.
Slide LO 4 Record transactions in journals, post to
3-16 ledger accounts, and prepare a trial balance. 2. Posting 9. October 26: Employees are paid every four weeks. The total payroll is $2,000 per day. The pay period ended on Friday, October 26, with salaries of $40,000 being paid.
Slide LO 4 Record transactions in journals, post to
3-17 ledger accounts, and prepare a trial balance. 2. Posting 10. October 31: Pioneer Advertising receives $28,000 in cash and bills Copa Company $72,000 for advertising services of $100,000 provided in October.
Trial Balance – A list of each account and its balance; used to prove equality of debit and credit balances.
Slide LO 4 Record transactions in journals, post to
3-19 ledger accounts, and prepare a trial balance. 4. Adjusting Entries
Makes it possible to:
Report on the statement of financial position the appropriate assets, liabilities, and equity at the statement date. Report on the income statement the proper revenues and expenses for the period. Revenues are recorded in the period in which they are earned. Expenses are recognized in the period in which they are incurred.
Slide 3-20 LO 5 Explain the reasons for preparing adjusting entries. Types of Adjusting Entries
Illustration 3-20
Deferrals Accruals 1. Prepaid Expenses. 3. Accrued Revenues. Expenses paid in cash and Revenues earned but not recorded as assets before yet received in cash or they are used or consumed. recorded.
2. Unearned Revenues. 4. Accrued Expenses.
Revenues received in cash Expenses incurred but not and recorded as liabilities yet paid in cash or recorded. before they are earned.
Slide 3-21 LO 5 Explain the reasons for preparing adjusting entries. Adjusting Entries for “Prepaid Expenses” Supplies. Pioneer purchased advertising supplies costing $25,000 on October 5. Prepare the journal entry to record the purchase of the supplies.
Oct. 5 Advertising supplies 25,000
Account Payable 25,000
Advertising Supplies Account Payable
Debit Credit Debit Credit 25,000 25,000
Slide 3-22 LO 5 Explain the reasons for preparing adjusting entries. Adjusting Entries for “Prepaid Expenses” Supplies. An inventory count at the close of business on October 31 reveals that $10,000 of the advertising supplies are still on hand.
Slide 3-23 LO 5 Explain the reasons for preparing adjusting entries. Adjusting Entries for “Prepaid Expenses” Insurance. On Oct. 4th, Pioneer paid $6,000 for a one-year fire insurance policy, beginning October 1. Show the entry to record the purchase of the insurance.
Oct. 4 Prepaid insurance 6,000
Cash 6,000
Prepaid Insurance Cash
Debit Credit Debit Credit 6,000 6,000
Slide 3-24 LO 5 Explain the reasons for preparing adjusting entries. Adjusting Entries for “Prepaid Expenses” Insurance. An analysis of the policy reveals that $500 ($6,000 / 12) of insurance expires each month. Thus, Pioneer makes the following adjusting entry.
Prepaid Insurance Insurance Expense
Debit Credit Debit Credit 6,000
Slide 3-25 LO 5 Explain the reasons for preparing adjusting entries. Adjusting Entries for “Prepaid Expenses” Depreciation. Pioneer Advertising estimates depreciation on its office equipment to be $400 per month. Accordingly, Pioneer recognizes depreciation for October by the following adjusting entry.
Depreciation Expense Accumulated Depreciation
Debit Credit Debit Credit
Slide 3-26 LO 5 Explain the reasons for preparing adjusting entries. Adjusting Entries for “Unearned Revenues”
Unearned Revenue. Pioneer Advertising received $12,000 on
October 2 from KC for advertising services expected to be completed by December 31. Show the journal entry to record the receipt on Oct. 2nd. Oct. 2 Cash 12,000 Unearned service revenue 12,000
Cash Unearned Service Revenue
Debit Credit Debit Credit 12,000 12,000
Slide 3-27 LO 5 Explain the reasons for preparing adjusting entries. Adjusting Entries for “Unearned Revenues” Unearned Revenues. Analysis reveals that Pioneer earned $4,000 of the advertising services in October. Thus, Pioneer makes the following adjusting entry.
Service Revenue Unearned Service Revenue
Debit Credit Debit Credit 100,000 12,000
Slide 3-28 LO 5 Explain the reasons for preparing adjusting entries. Adjusting Entries for “Accrued Revenues”
Accrued Revenues. In October Pioneer earned $2,000 for
advertising services that it did not bill to clients before October 31. Thus, Pioneer makes the following adjusting entry.
Accounts Receivable Service Revenue
Debit Credit Debit Credit 72,000 100,000 4,000
Slide 3-29 Adjusting Entries for “Accrued Expenses”
Accrued Interest. Pioneer signed a three-month, 12%, note
payable in the amount of $50,000 on October 1. The note requires interest at an annual rate of 12 percent. Three factors determine the amount of the interest accumulation:
1 2 3 Illustration 3-29
Slide 3-30 LO 5 Explain the reasons for preparing adjusting entries. Adjusting Entries for “Accrued Expenses”
Accrued Interest. Pioneer signed a three-month, 12%, note
payable in the amount of $50,000 on October 1. Prepare the adjusting entry on Oct. 31 to record the accrual of interest.
Interest Expense Interest Payable
Debit Credit Debit Credit
Slide 3-31 LO 5 Explain the reasons for preparing adjusting entries. Adjusting Entries for “Accrued Expenses”
Accrued Salaries. At October 31, the salaries for these days
represent an accrued expense and a related liability to Pioneer. The employees receive total salaries of $10,000 for a five-day work week, or $2,000 per day.
Slide 3-32 LO 5 Explain the reasons for preparing adjusting entries. Adjusting Entries for “Accrued Expenses”
Accrued Salaries. Employees receive total salaries of $10,000
for a five-day work week, or $2,000 per day. Prepare the adjusting entry on Oct. 31 to record accrual for salaries.
Salaries Expense Salaries Payable
Debit Credit Debit Credit 40,000
Slide 3-33 LO 5 Explain the reasons for preparing adjusting entries. Adjusting Entries for “Accrued Expenses”
Accrued Salaries. On November 23, Pioneer will again pay total
salaries of $40,000. Prepare the entry to record the payment of salaries on November 23.
Salaries Expense Salaries Payable
Debit Credit Debit Credit 6,000
Slide 3-34 LO 5 Explain the reasons for preparing adjusting entries. Adjusting Entries for “Accrued Expenses”
Bad Debts. Assume Pioneer reasonably estimates a bad debt
expense for the month of $1,600. It makes the adjusting entry for bad debts as follows.
Illustration 3-32
Slide 3-35 LO 5 Explain the reasons for preparing adjusting entries. 5. Adjusted Trial Balance
Illustration 3-33 Shows the balance of all accounts, after adjusting entries, at the end of the accounting period.
Slide 3-36 LO 5 Panda Corporation paid cash of Rp12,000 on June 1, 2019 for one year’s rent in advance and recorded the transaction with a debit to Prepaid Rent. The December 31, 2019 adjusting entry is
a. debit Prepaid Rent and credit Rent Expense, Rp5,000.
b. debit Prepaid Rent and credit Rent Expense, Rp7,000.
c. debit Rent Expense and credit Prepaid Rent, Rp7,000.
d. debit Prepaid Rent and credit Cash, Rp5,000.
Slide 3-37 Murphy Company sublet a portion of its warehouse for five years at an annual rental of €30,000, beginning on May 1, 2019. The tenant, Sheri Charter, paid one year's rent in advance, which Murphy recorded as a credit to Unearned Rent Revenue. Murphy reports on a calendar-year basis. The adjustment on December 31, 2019 for Murphy should be
a. No entry
b. Unearned Rent Revenue 10,000
Rent Revenue 10,000
c. Rent Revenue 10,000
Unearned Rent Revenue 10,000
d. Unearned Rent Revenue 20,000
Slide 3-38 Rent Revenue 20,000 Cara, Inc. purchased supplies costing TL2,500 on January 1, 2019 and recorded the transaction by increasing assets. At the end of the year TL1,000 of the supplies are still on hand. How will the adjusting entry impact Cara, Inc.’s statement of financial position at December 31, 2019?
a. Decrease Assets TL1,000.
b. Increase Equity TL1,000.
c. Increase Liabilities TL1,500.
d. Decrease Assets TL1,500.
Slide 3-39 Wave Inn is a resort located in Canada. Wave Inn collects cash when guest make a reservation. During December 2019, Wave Inn collected $90,000 of cash and recorded the receipt by recognizing unearned revenue. By the end of the month Wave Inn had earned one third of this amount, the other two thirds will be earned during January 2020. The adjusting entry required at December 31, 2019 would impact the statement of financial position by
a. Increasing Equity $60,000.
b. Decreasing Liabilities $30,000.
c. Increasing Assets $90,000.
d. Decreasing Equity $30,000
Slide 3-40 6. Preparing Financial Statements
Financial Statements are prepared directly from the
Adjusted Trial Balance.
Retained Statement Income Earnings of Financial Statement Statement Position
Slide 3-41 LO 6 Prepare financial statement from the adjusted trial balance. 6. Preparing Financial Statements Illustration 3-34
Slide 3-42 LO 6 6. Preparing Financial Statements Illustration 3-35
Slide 3-43 LO 6 7. Closing Entries
To reduce the balance of the income statement
(revenue and expense) accounts to zero.
To transfer net income or net loss to equity.
Statement of financial position (asset, liability, and
Slide 3-45 LO 7 7. Closing Entries Illustration 3-37
Slide 3-46 LO 7 Big-Mouth Frog Corporation had revenues of €210,000, expenses of €120,000, and dividends of €30,000. When Income Summary is closed to Retained Earnings, the amount of the debit or credit to Retained Earnings is a
a. debit of €60,000.
b. debit of €90,000.
c. credit of €60,000.
d. credit of €90,000.
Slide 3-47 8. Post-Closing Trial Balance
Illustration 3-38
Slide 3-48 LO 7 Prepare closing entries. Accounting Cycle Summarized
1. Enter the transactions of the period in appropriate journals.
2. Post from the journals to the ledger (or ledgers). 3. Take an unadjusted trial balance (trial balance). 4. Prepare adjusting journal entries and post to the ledger(s). 5. Take a trial balance after adjusting (adjusted trial balance). 6. Prepare the financial statements from the second trial balance. 7. Prepare closing journal entries and post to the ledger(s). 8. Take a trial balance after closing (post-closing trial balance).
