Explanation Journalizing: Journalizing is the process of recording the transactions of an organization in a chronological order. Based on these journal entries recorded, the accounts are posted to the relevant ledger accounts. Accounting rules for journal entries: To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains. To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains. Recording interest expense: Date Account Title and Explanation Post Ref. Debit($) Credit($) Interest expense 375 Interest Payable 375 (to record interest expense) Table (1) Since interest expense is an expense, expense is increased. Hence, interest expense account is debited. Since interest payable is a liability, liability is increased. Hence, interest payable account is credited. Recording adjustment of supplies: Date Account Title and Explanation Post Ref. Debit($) Credit($) Supplies Expense ( $ 2 , 975 − $ 1 , 825 ) 1,150 Supplies 1,150 (to record adjustment of supplies) Table (2) Since supplies expense is an expense, expense is increased. Hence, supplies expense account is debited. Since supplies is an asset, asset is decreased. Hence, supplies account is credited. Recording adjustment of prepaid insurance: Date Account Title and Explanation Post Ref. Debit($) Credit($) Insurance Expense ( $ 3 , 600 × 2 12 ) 600 Prepaid insurance 600 (to record adjustment of prepaid insurance) Table (3) Since insurance expense is an expense, expense is increased. Hence, insurance expense account is debited. Since prepaid insurance is an asset, asset is decreased. Hence, prepaid insurance account is credited. Recording depreciation expense: Date Account Title and Explanation Post Ref. Debit($) Credit($) Depreciation ( $ 180 × 2 ) 360 Accumulated depreciation 360 (to record depreciation expense) Table (4) Since depreciation is an expense, expense is increased. Hence, depreciation account is debited. Since accumulated depreciation is a contra asset, contra asset is increased. Hence, accumulated depreciation account is credited. Recording adjustment of prepaid rent: Date Account Title and Explanation Post Ref

4th Edition

ISBN: 9781337690881

Author: Jay Rich, Jeff Jones

Publisher: Cengage Learning

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Question

Chapter 3, Problem 81.4C

To determine

To prepare: Adjusting entries.

Introduction: Adjusting entries are made at the end of reporting period at the time of preparation of financial statements. Adjusting entries are recorded to reflect the correct picture of financial position of the organization in the financial statements.

Expert Solution & Answer

Chapter 3 Solutions

Cornerstones of Financial Accounting

Ch. 3 - How does accural-basis net income differ from...Ch. 3 - Explain when revenue may be recognized and give an...Ch. 3 - What happens during the accounting cycle?Ch. 3 - Prob. 4DQ Ch. 3 - Why are adjusting entries needed?Ch. 3 - What accounting concepts require that adjusting...Ch. 3 - Prob. 7DQ Ch. 3 - Prob. 8DQ Ch. 3 - What is the difference between an accural and a...Ch. 3 - Prob. 10DQ

Knowledge Booster

Adjusting entries . Introduction: Adjusting entries are made at the end of reporting period at the time of preparation of financial statements. Adjusting entries are recorded to reflect the correct picture of financial position of the organization in the financial statements.

Solution Summary: The author explains the accounting rules for journaling, which are the process of recording the transactions of an organization in a chronological order.

To prepare: Adjusting entries.

Introduction: Adjusting entries are made at the end of reporting period at the time of preparation of financial statements. Adjusting entries are recorded to reflect the correct picture of financial position of the organization in the financial statements.

Chapter 3 Solutions

Adjusting entries . Introduction: Adjusting entries are made at the end of reporting period at the time of preparation of financial statements. Adjusting entries are recorded to reflect the correct picture of financial position of the organization in the financial statements.

Solution Summary: The author explains the accounting rules for journaling, which are the process of recording the transactions of an organization in a chronological order.

To prepare: Adjusting entries. Introduction: Adjusting entries are made at the end of reporting period at the time of preparation of financial statements. Adjusting entries are recorded to reflect the correct picture of financial position of the organization in the financial statements.

Chapter 3 Solutions

To prepare: Adjusting entries.

Introduction: Adjusting entries are made at the end of reporting period at the time of preparation of financial statements. Adjusting entries are recorded to reflect the correct picture of financial position of the organization in the financial statements.