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For each of the following, journalize the necessary adjusting entry: (a) A business pays weekly salaries of $22,000 on Friday for a five-day week ending on that day. Journalize the necessary adjusting entry at the end of the fiscal period, assuming that (1) The fiscal period ends on Tuesday. (2) Assume the same facts except that the fiscal period ends on Wednesday. (b) The balance in the prepaid insurance account before adjustment at the end of the year is $18,000. Journalize the adjusting entry required under each of the following alternatives: (1) The amount of insurance expired during the year is $5,300. (2) Assume the same facts except that the amount of unexpired insurance applicable to a future period is $2,700. (c) On July 1 of the current year, a business pays $54,000 to the city for license taxes for the coming fiscal year. The same business is also required to pay an annual property tax at the end of the year. The estimated amount of the current year's property tax allocated to July is $4,800. (1) Journalize the two adjusting entries required to bring the accounts affected by the taxes up to date as of July 31. License Property Tax (2) What is the amount of tax expense for July? $ (d) The estimated depreciation on equipment for the year is $32,000.

Answer :

tanseershar

Answer:

a) Salaries

1) Wages Expense ($20,000*2/5)  Dr. $8,800

   Wages payable                                          Cr. $8,800

2)   Wages Expense ($20,000*3/5) Dr. $ 13,200

     Wages payable                                       Cr. $ 13,200

b) Insurance

1)  Insurance Expense       Dr. $ 5,300

   Prepaid Insurance                    Cr. $ 5,300

2) Insurance Expense ($18,000-$2,700) Dr. $15,300

   Prepaid Insurance                                 Cr. $15,300

C) License Taxes

1) Prepaid License Taxes        Dr. $ 54,000

  Bank                                      Cr. $ 54,000

  Property Taxes  Expense   Dr. $ 4,800

  Taxes Payable                     Cr. $ 4,800

2) License Tax Expense Dr. $ 54,000

   Prepaid Tax Expense  Cr. $ 54,000      

D) Depreciation

 Depreciation Expense   Dr. $32,000

 Accumulated Depreciation   Cr. $ 32,000  

Explanation:

We know first of all the principle of Debit $ Credit. When Asset and Expense increase, they are debited and when they decrease,they are credited. When liability, capital and income increase they are credited and when decrease they are debited.

Our all adjustments surrounds these accounting basic rules;

Part a) When we accrue expense for two  & three days, we record expense and liability as per above debit credit rules

Part b)Prepaid insurance is adjusted when it is utilized for the period expired

Part c) Again these are accrual concept and prepaid concept followed whereas license tax is paid for coming fiscal year, it is prepaid. whereas property tax is payable therefore it is accrued

Part d) depreciation is also an expense there it is debited and corresponding effect is recorded in accumulated depreciation. Please note accumulated depreciation is allowance or reserve account therefore it is credited

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