Accoutning adjustment?
Question:
could you please help me to understand these concepts, these are some
adjustments that i have never faced and i dont know how should i
change my new blalnce sheet and what is going in debit side and what
is going in credit side?
I really appreciate it,
thanks,
Accounting adjustment?
<<Debit Balances>>
Account balances on February 28(the end of its fiscal year)
cash ......... 88,860
A/R .........
Merchandise inventory ...903,130
store equipment ....70,970
supplies inventory ....17,480
prepaid insurance ....12,430
selling expense......10,88...
sales salaries......4...
miscellaneous general expense ...18,930
sales discounts......3,3...
interest expense.... 7,100
social security tax expense....3,400
total.......
<<Credit balances>>
accumulated depreciation on store equipment 11,420
notes payable.. 88,500
A/P .......88,970
common stock.100,000
Retained earnings ...33,500
sales .....988,700
Data for adjustment:
1)cost of merchandise sold 604,783
2)store equipment had a useful life of seven years(all equipment was
less than 7years old)
3)supplies inventory February 28, 3877.purchases of suppliers during
the year were debited to the supplies Inventory account.)
4)The note payable was at an interest rate of 9 percent, payable
monthly. It had been outstanding thought out the year.
5)the statement sent by the bank adjusted for checks outstanding shows
a balance of 88110. The difference represented bank service changes.
Thanks,
Answer:
1. Debit Cash 604,783
Credit Sales 604,783
2. If you add the balances in the store equipment and accumulated depreciation accounts and divide by 7, you find that the depreciation expense for each year is 11,770 (assuming a straight-line depreciation method is used). Therefore,
Debit Depreciation Expense 11,770
Credit Accumulated Depreciation 11,770
3. Debit Supplies Inventory 3,877
Credit Cash 3,877
4. If we multiply the face value of the note payable (88,500) by the interest rate (9%), we get 7965. Therefore,
Debit Interest Expense 7965
Credit Interest Payable 7965
5. The difference between the Cash account and the Bank Statement is 750 (88,860-88,110). Therefore,
Debit Bank Charges 750
Credit Cash 750
Hope that helps!
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