Post on 02-Jan-2016
Chapter 3-1
CHAPTER CHAPTER 33
ADJUSTING THE ADJUSTING THE ACCOUNTSACCOUNTS
Accounting Principles, Eighth Edition
Chapter 3-2
Depreciation (Statement Presentation)
Accumulated Depreciation is a contra asset account.
Appears just after the account it offsets (Equipment) on the balance sheet.
Adjusting Entries for “Prepaid Adjusting Entries for “Prepaid Expenses”Expenses”Adjusting Entries for “Prepaid Adjusting Entries for “Prepaid Expenses”Expenses”
LO 5 LO 5 Prepare adjusting entries for deferrals.Prepare adjusting entries for deferrals.
Balance Sheet J an. 31
Assets
Equipment 24,000 Accumulated Depreciation (100) Net Equipment 23,900
Chapter 3-3
Receipt of cash that is recorded as a liability Receipt of cash that is recorded as a liability because the revenue has not been earned.because the revenue has not been earned.
Adjusting Entries for “Unearned Adjusting Entries for “Unearned Revenues”Revenues”Adjusting Entries for “Unearned Adjusting Entries for “Unearned Revenues”Revenues”
rentrent
airline ticketsairline tickets
school tuitionschool tuition
Cash ReceiptCash Receipt Revenue RecordedRevenue RecordedBEFORE
magazine subscriptionsmagazine subscriptions
customer depositscustomer deposits
Unearned revenues often occur in regard to:Unearned revenues often occur in regard to:
LO 5 LO 5 Prepare adjusting entries for deferrals.Prepare adjusting entries for deferrals.
Chapter 3-4
Unearned Revenues
Company makes an adjusting entry to record the revenue that has been earned and to show the liability that remains.
The adjusting entry for unearned revenues results in a decrease (a debit) to a liability account and an increase (a credit) to a revenue account.
LO 5 LO 5 Prepare adjusting entries for deferrals.Prepare adjusting entries for deferrals.
Adjusting Entries for “Unearned Adjusting Entries for “Unearned Revenues”Revenues”Adjusting Entries for “Unearned Adjusting Entries for “Unearned Revenues”Revenues”
Chapter 3-5 LO 5 LO 5 Prepare adjusting entries for deferrals.Prepare adjusting entries for deferrals.
Adjusting entries for unearned revenues
Decrease (a debit) to a liability account and
Increase (a credit) to a revenue account.
Adjusting Entries for “Unearned Adjusting Entries for “Unearned Revenues”Revenues”Adjusting Entries for “Unearned Adjusting Entries for “Unearned Revenues”Revenues”
Illustration 3-10Illustration 3-10
Chapter 3-6
Example:Example: On Jan. 1On Jan. 1stst, Phoenix Consulting received , Phoenix Consulting received $24,000 from Arcadia High School for 3 months $24,000 from Arcadia High School for 3 months rentrent in in advance. Show the journal entry to record the receipt advance. Show the journal entry to record the receipt on Jan. 1on Jan. 1stst. .
Unearned Rent Revenue
24,000
Cash 24,000
Jan. 1
Debit Credit
Cash
24,00024,000 24,00024,000
Debit Credit
Unearned Rent Revenue
Adjusting Entries for “Unearned Adjusting Entries for “Unearned Revenues”Revenues”Adjusting Entries for “Unearned Adjusting Entries for “Unearned Revenues”Revenues”
LO 5 LO 5 Prepare adjusting entries for deferrals.Prepare adjusting entries for deferrals.
Chapter 3-7
Example:Example: On Jan. 1On Jan. 1stst, Phoenix Consulting received , Phoenix Consulting received $24,000 from Arcadia High School for 3 months rent in $24,000 from Arcadia High School for 3 months rent in advance. Show the advance. Show the adjusting journal entryadjusting journal entry required on required on Jan. 31Jan. 31stst. .
Rent Revenue 8,000
Unearned Rent Revenue
8,000Jan. 31
Debit Credit
Rent Revenue
8,0008,000 24,00024,000
Debit Credit
Unearned Rent Revenue
8,0008,000
16,00016,000
Adjusting Entries for “Unearned Adjusting Entries for “Unearned Revenues”Revenues”Adjusting Entries for “Unearned Adjusting Entries for “Unearned Revenues”Revenues”
LO 5 LO 5 Prepare adjusting entries for deferrals.Prepare adjusting entries for deferrals.
Chapter 3-8
Made to record:
Revenues earned and
OR
Expenses incurred
in the current accounting period that have not been recognized through daily entries.
Adjusting Entries for AccrualsAdjusting Entries for AccrualsAdjusting Entries for AccrualsAdjusting Entries for Accruals
LO 6 LO 6 Prepare adjusting entries for accruals.Prepare adjusting entries for accruals.
Chapter 3-9
Revenues earned but not yet received in cash or Revenues earned but not yet received in cash or recorded.recorded.
Adjusting Entries for “Accrued Adjusting Entries for “Accrued Revenues”Revenues”Adjusting Entries for “Accrued Adjusting Entries for “Accrued Revenues”Revenues”
rentrent
interestinterest
services performedservices performed
BEFORE
Accrued revenues often occur in regard to:Accrued revenues often occur in regard to:
Cash ReceiptCash ReceiptRevenue RecordedRevenue Recorded
Adjusting entry results in:Adjusting entry results in:
LO 6 LO 6 Prepare adjusting entries for accruals.Prepare adjusting entries for accruals.
Chapter 3-10
Accrued Revenues
An adjusting entry serves two purposes:
(1) It shows the receivable that exists, and
(2) It records the revenues earned.
Adjusting Entries for “Accrued Adjusting Entries for “Accrued Revenues”Revenues”Adjusting Entries for “Accrued Adjusting Entries for “Accrued Revenues”Revenues”
LO 6 LO 6 Prepare adjusting entries for accruals.Prepare adjusting entries for accruals.
Chapter 3-11
Adjusting entries for accrued revenues
Increases (debits) an asset account and
Increases (credits) a revenue account.
LO 6 LO 6 Prepare adjusting entries for accruals.Prepare adjusting entries for accruals.
Adjusting Entries for “Accrued Adjusting Entries for “Accrued Revenues”Revenues”Adjusting Entries for “Accrued Adjusting Entries for “Accrued Revenues”Revenues”Illustration 3-13Illustration 3-13
Chapter 3-12
Example:Example: On Jan. 1On Jan. 1stst, Phoenix Consulting invested , Phoenix Consulting invested $300,000 in securities that return 5% interest per year. $300,000 in securities that return 5% interest per year. Show the journal entry to record the investment on Jan. Show the journal entry to record the investment on Jan. 11stst. .
Cash 300,000
Investments 300,000
Jan. 1
LO 6 LO 6 Prepare adjusting entries for accruals.Prepare adjusting entries for accruals.
Debit Credit
Investments
300,000300,000 300,000300,000
Debit Credit
Cash
Adjusting Entries for “Accrued Adjusting Entries for “Accrued Revenues”Revenues”Adjusting Entries for “Accrued Adjusting Entries for “Accrued Revenues”Revenues”
Chapter 3-13
Example:Example: On Jan. 1On Jan. 1stst, Phoenix Consulting invested , Phoenix Consulting invested $300,000 in securities that return 5% interest per year. $300,000 in securities that return 5% interest per year. Show the Show the adjusting journal entryadjusting journal entry required on Jan. 31 required on Jan. 31stst. . ($300,000 x 5% / 12 months = $1,250)($300,000 x 5% / 12 months = $1,250)
Interest Revenue 1,250
Interest Receivable 1,250Jan. 31
Debit Credit
Interest Receivable
1,2501,250 1,2501,250
Debit Credit
Interest Revenue
Adjusting Entries for “Accrued Adjusting Entries for “Accrued Revenues”Revenues”Adjusting Entries for “Accrued Adjusting Entries for “Accrued Revenues”Revenues”
Look page 104Look page 104
Chapter 3-14
Expenses incurred but not yet paid in cash or Expenses incurred but not yet paid in cash or recorded.recorded.
Adjusting Entries for “Accrued Adjusting Entries for “Accrued Expenses”Expenses”Adjusting Entries for “Accrued Adjusting Entries for “Accrued Expenses”Expenses”
rentrent
interestinterest
BEFORE
Accrued expenses often occur in regard to:Accrued expenses often occur in regard to:
Cash PaymentCash PaymentExpense RecordedExpense Recorded
taxestaxes
salariessalaries
Adjusting entry results in:Adjusting entry results in:
LO 6 LO 6 Prepare adjusting entries for accruals.Prepare adjusting entries for accruals.
Chapter 3-15
Accrued Expenses
An adjusting entry serves two purposes:
(1) It records the obligations, and
(2) It recognizes the expenses.
Adjusting Entries for “Accrued Adjusting Entries for “Accrued Expenses”Expenses”Adjusting Entries for “Accrued Adjusting Entries for “Accrued Expenses”Expenses”
LO 6 LO 6 Prepare adjusting entries for accruals.Prepare adjusting entries for accruals.
Chapter 3-16
Adjusting entries for accrued expenses
Increases (debits) an expense account and
Increases (credits) a liability account.
LO 6 LO 6 Prepare adjusting entries for accruals.Prepare adjusting entries for accruals.
Adjusting Entries for “Accrued Adjusting Entries for “Accrued Expenses”Expenses”Adjusting Entries for “Accrued Adjusting Entries for “Accrued Expenses”Expenses”Illustration 3-16Illustration 3-16
Chapter 3-17
Notes Payable 200,000
Cash 200,000
Jan. 2
Debit Credit
Cash
200,000200,000 200,000200,000
Debit Credit
Notes Payable
Example:Example: On Jan. 2On Jan. 2ndnd, Phoenix Consulting borrowed , Phoenix Consulting borrowed $200,000 at a rate of 9% per year. Interest is due on first $200,000 at a rate of 9% per year. Interest is due on first of each month. Show the journal entry to record the of each month. Show the journal entry to record the borrowing on Jan. 2borrowing on Jan. 2ndnd..
Adjusting Entries for “Accrued Adjusting Entries for “Accrued Expenses”Expenses”Adjusting Entries for “Accrued Adjusting Entries for “Accrued Expenses”Expenses”
LO 6 LO 6 Prepare adjusting entries for accruals.Prepare adjusting entries for accruals.
Chapter 3-18
Example:Example: On Jan. 2On Jan. 2ndnd, Phoenix Consulting borrowed , Phoenix Consulting borrowed $200,000 at a rate of 9% per year. Interest is due on first $200,000 at a rate of 9% per year. Interest is due on first of each month. Show the of each month. Show the adjusting journal entryadjusting journal entry required required on Jan. 31on Jan. 31stst. . ($200,000 x 9% / 12 months = $1,500)($200,000 x 9% / 12 months = $1,500)
Interest Payable 1,500
Interest Expense 1,500Jan. 31
Debit Credit
Interest Expense
1,5001,500 1,5001,500
Debit Credit
Interest Payable
Adjusting Entries for “Accrued Adjusting Entries for “Accrued Expenses”Expenses”Adjusting Entries for “Accrued Adjusting Entries for “Accrued Expenses”Expenses”
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