
(1)
Adjusting entries indicates those entries, which are passed in the books of accounts at the end of one accounting period. These entries are passed in the books of accounts as per the revenue recognition principle and the expenses recognition principle to adjust the revenue, and the expenses of a business in the period of their occurrence.
Adjusted
Adjusted trial balance is a trial balance prepared at the end of a financial period, after all the adjusting entries are journalized and posted. It is prepared to prove the equality of the total debit and credit balances.
Rule of Debit and Credit:
Debit - Increase in all assets, expenses & dividends, and decrease in all liabilities and
Credit - Increase in all liabilities and stockholders’ equity, and decrease in all assets & expenses.
To record: The adjusting entries on August 31, 2016 of Company R.
(1)

Explanation of Solution
a. The following entry shows the adjusting entry for insurance expense on August 31.
Date | Description | Post. Ref |
Debit ($) |
Credit ($) |
August 31, 2016 | Insurance expense (1) | 1,200 | ||
Prepaid insurance | 1,200 | |||
(To record the insurance expense incurred at the end of the year) |
Table (1)
The impact on the
Working note:
Calculate the value of insurance expense at the end of the year
- Insurance expense is a component of owners’ equity, and decreased it by $1,200 hence debit the insurance expense for $1,200.
- Prepaid insurance is an asset, and it decreases the value of asset by $1,200, hence credit the prepaid insurance for $1,200.
b. The following entry shows the adjusting entry for supplies on August 31.
Date | Account Titles and Explanation | Debit ($) | Credit ($) |
August 31, 2016 | Supplies Expense (2) | 1,500 | |
Supplies | 1,500 | ||
(To record the supplies expense at the end of the accounting period) |
Table (2)
The impact on the accounting equation for the above referred adjusting entry is as follows:
- Supplies expense is a component of stockholders’ equity, and it decreased the stockholders’ equity by $1,500. So debit supplies expense by $1,500.
- Supplies are an asset for the business, and it is decreased by $1,500. So credit supplies by $1,500.
Working Note:
Calculation of Supplies expense for the accounting period
c. The adjusting entry for recording
Date | Account Titles and Explanation | Debit ($) | Credit ($) |
August 31, 2016 | Depreciation expense - Building | 7,500 | |
| 7,500 | ||
(To record the depreciation on building for the current year.) |
Table (3)
The impact on the accounting equation for the above referred adjusting entry is as follows:
- Depreciation expense is component of stockholders’ equity and decreased it, so debit depreciation expense by $7,500.
- Accumulated depreciation is a contra asset account, and it decreases the asset value by $7,500. So credit accumulated depreciation by $7,500.
d. The adjusting entry for recording depreciation is as follows:
Date | Account Titles and Explanation | Debit ($) | Credit ($) |
August 31, 2016 | Depreciation expense-Equipment | 8,600 | |
Accumulated Depreciation- Equipment | 8,600 | ||
(To record the depreciation on equipment for the current year.) |
Table (4)
The impact on the accounting equation for the above referred adjusting entry is as follows:
- Depreciation expense is component of stockholders’ equity and decreased it, so debit depreciation expense by $8,600.
- Accumulated depreciation is a contra asset account, and it decreases the asset value by $8,600. So credit accumulated depreciation by $8,600.
e. The following entry shows the adjusting entry for Unearned Rent on August 31.
Date | Account Titles and Explanation | Debit ($) | Credit ($) |
August 31, 2016 | Unearned Rent | 5,200 | |
Rent revenue (3) | 5,200 | ||
(To record the Rent revenue from services at the end of the accounting period.) |
Table (5)
The impact on the accounting equation for the above referred adjusting entry is as follows:
- Unearned Rent is a liability, and it is decreased by $5,200. So debit unearned rent by $5,200.
- Rent revenue is a component of Stockholders’ equity, and it is increased by $5,200. So credit rent revenue by $5,200.
Working Notes:
Calculate the rent revenue for the accounting period
f. The following entry shows the adjusting entry for Salary and wages expense on August 31.
Date | Account Titles and Explanation | Debit ($) | Credit ($) |
August 31, 2016 | Salary and wages expense | 3,200 | |
Salary and Wages Payable | 3,200 | ||
(To record the salary and wages accrued but not paid at the end of the accounting period.) |
Table (6)
The impact on the accounting equation for the above referred adjusting entry is as follows:
- Salary and wages expense is a component of Stockholders ‘equity, and it decreased it by $3,200. So debit wage expense by $3,200.
- Salary and wages payable is a liability, and it is increased by $3,200. So credit Salary and wages payable by $3,200.
g. The following entry shows the adjusting entry for accrued fees unearned on August 31.
Date | Account Titles and Explanation | Debit ($) | Credit ($) |
August 31, 2016 | Accounts Receivable | 11,330 | |
Fees earned | 11,330 | ||
(To record the accounts receivable at the end of the year.) |
Table (7)
The impact on the accounting equation for the above referred adjusting entry is as follows:
- Accounts Receivable is an asset, and it is increased by $11,330. So debit Accounts receivable by $11,330.
- Fees earned are component of stockholders’ equity, and it increased it by $11,330. So credit fees earned by $11,330.
(2)
To prepare: The adjusted trial balance of the Company R
(2)

Explanation of Solution
The adjusted trial balance of the Company R is shown below:
Company R | ||
Trial Balance after Adjustments | ||
August 31, 2016 | ||
Particulars | Debit $ | Credit $ |
Cash | 7,500 | |
49,730 | ||
Prepaid Insurance | 6,000 | |
Supplies | 480 | |
Land | 112,500 | |
Building | 150,250 | |
Accumulated Depreciation - Building (3) | 95,050 | |
Equipment | 135,300 | |
Accumulated Depreciation – Equipment (4) | 102,1000 | |
Accounts Payable | 12,150 | |
Unearned Rent | 1,550 | |
Salaries and Wages Payable | 3,200 | |
Capital | 221,000 | |
Drawing | 15,000 | |
Fees earned | 335,930 | |
Rent Revenue (5) | 5,200 | |
Salaries and Wages Expense | 196,170 | |
Utilities Expense | 42,375 | |
Advertising Expense | 22,800 | |
Repairs Expense | 17,250 | |
Depreciation Expense - building | 7,500 | |
Depreciation Expense - equipment | 4,150 | |
Insurance Expense (1) | 1,200 | |
Supplies Expense (2) | 1,500 | |
Miscellaneous Expense | 6,075 | |
Total | 776,180 | 776,180 |
Table (8)
Working Notes:
1. Calculate the value of prepaid insurance at the end of the year
2. Calculate the supplies for the accounting period
3. Calculate the value of building
4. Calculate the value of equipment
5. Calculation of accounts receivable
Hence, the total of debit and credit column of the adjusted trial balance matches and they have a total balance of $776,180.
Want to see more full solutions like this?
Chapter 3 Solutions
Custom Bundle: Accounting, Loose-leaf Version, 26th + Working Papers, Chapters 1-17, 26th Edition
- 9 A B C D E 4 Ramsey Miller Style, Inc. manufactures a product which requires 15 pounds of direct materials at a cost of $8 5 per pound and 5.0 direct labor hours at a rate of $17 per hour. Variable overhead is budgeted at a rate of $3 per direct labor hour. Budgeted fixed overhead is $433,000 per month. The company's policy is to end each month with direct materials inventory equal to 45% of the next month's direct materials requirement, and finished 7 goods inventory equal to 60% of next month's sales. August sales were 13,400 units, and marketing expects 8 sales to increase by 500 units in each of the upcoming three months. At the end of August, the company had 9 95,850 pounds of direct materials in inventory, and 8,340 units in finished goods inventory. 10 11 August sales 12 Expected increase in monthly sales 13 Desired ending finished goods (units) 14 Selling price per unit 15 Direct materials per unit 16 Direct materials cost 17 Direct labor hours (DLHS) per unit 18 Direct labor…arrow_forwardSherrod, Incorporated, reported pretax accounting income of $84 million for 2024. The following information relates to differences between pretax accounting income and taxable income: a. Income from installment sales of properties included in pretax accounting income in 2024 exceeded that reported for tax purposes by $3 million. The installment receivable account at year-end 2024 had a balance of $4 million (representing portions of 2023 and 2024 installment sales), expected to be collected equally in 2025 and 2026. b. Sherrod was assessed a penalty of $4 million by the Environmental Protection Agency for violation of a federal law in 2024. The fine is to be paid in equal amounts in 2024 and 2025. c. Sherrod rents its operating facilities but owns one asset acquired in 2023 at a cost of $88 million. Depreciation is reported by the straight-line method, assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight- line depreciation the…arrow_forwardProvide answerarrow_forward
- $ 36,000 204,000 The Drysdale, Koufax, and Marichal partnership has the following balance sheet immediately prior to liquidation: Cash Noncash assets Liabilities Drysdale, loan $ 50,000 10,000 Total assets $ 240,000 Drysdale, capital (50%) Koufax, capital (30%) Marichal, capital (20%) Total liabilities and capital 70,000 60,000 50,000 $ 240,000 Required: a-1. Determine the maximum loss that can be absorbed in Step 1. Then, assuming that this loss has been incurred, determine the next maximum loss that can be absorbed in Step 2. a-2. Liquidation expenses are estimated to be $15,000. Prepare a predistribution schedule to guide the distribution of cash. b. Assume that assets costing $74,000 are sold for $60,000. How is the available cash to be divided? Complete this question by entering your answers in the tabs below.arrow_forwardCalculate GP ratio round answers to decimal placearrow_forwardWhat is the gross profit percentage for this periodarrow_forward
- The company's gross margin percentage is ?arrow_forwardProblem 19-13 (Algo) Shoney Video Concepts produces a line of video streaming servers that are linked to personal computers for storing movies. These devices have very fast access and large storage capacity. Shoney is trying to determine a production plan for the next 12 months. The main criterion for this plan is that the employment level is to be held constant over the period. Shoney is continuing in its R&D efforts to develop new applications and prefers not to cause any adverse feelings with the local workforce. For the same reason, all employees should put in full workweeks, even if that is not the lowest-cost alternative. The forecast for the next 12 months is MONTH FORECAST DEMAND January February March April 530 730 830 530 May June 330 230 July 130 August 130 September 230 October 630 730 800 November December Manufacturing cost is $210 per server, equally divided between materials and labor. Inventory storage cost is $4 per unit per month and is assigned based on the ending…arrow_forwardCompute 007s gross profit percentage and rate of inventory turnover for 2016arrow_forward
- College Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College Pub
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage LearningCentury 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:CengagePrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College

