Chapter 4 Adjusting Entries and the Work Sheet
2. Accounting at Activision
Royalty-Free/Corbis 3. Performance Objectives
4. Performance Objectives (contd)
5. Performance Objectives (contd)
6. Performance Objective 1
Royalty Free C Squared Studios/ Getty Images 7. Fiscal Period
8. Fiscal Year
9. Accounting Cycle
Royalty Free C Squared Studios/ Getty Images 10. Steps in the Accounting Cycle Chapter 3
Chapter 4
Chapter 5
11. 12. Work Sheet
13. Work Sheet(contd) 14. Performance Objective 2
Royalty Free C Squared Studios/ Getty Images 15. Classifications of Accountsin a Column Work Sheet
16. Fundamental Accounting Equationand Normal Balances of Accounts 17. Income Statement Columns:Revenue Minus Expenses 18. Balance Sheet Columns: AssetsEqual Liabilities Plus Owners Equity 19. Classifications of Accountsin Each Column of a Work Sheet 20. Classifications of Accountsin Each Column of a Work Sheet(contd) 21. Classifications of Accountsin Each Column of a Work Sheet(contd) 22. Performance Objective 3
Royalty Free PhotoDisc Blue/ Getty Images 23. Adjustments 24. Adjustments(contd)
25. Adjustment for Prepaid Insurance
26. Recording theAdjustment on the Work Sheet
27. Adjustment for PrepaidInsurance Recorded in Work Sheet 28. Depreciation
29. Depreciation(contd)
30. Straight-line Depreciation
Cost of Equipment $83,720.00 Salvage $13,160.00 Useful Life in Years 7 Clines Computer Clinic 31. Calculating Straight-lineDepreciation
32. Calculating Straight-lineDepreciation(contd)
33. Calculating Straight-line Depreciation(contd)
34. Adjustment forDepreciation of Equipment
Depreciation Expense, Equipment 840 Accumulated Depreciation, Equipment840 Why dont we credit the Equipment account for this depreciation? The Equipment account must remain at the original cost.Debit Credit 35. Contra Accounts
36. Accumulated Depreciation
37. Accumulated Depreciation(contd) 38. Book Value or Carrying Value
39. Adjustment for DepreciationRecorded in Work Sheet 40. Adjustment for Wages Expense
41. Adjustment for Wages Expense(contd) 42. Adjustment for Wages Expense(contd) 43. Adjustment for Wages Expense(contd) 44. Adjustment for Wages Expensefor Clines Computer Clinic 45. Adjustment for Wages Expense Recorded in Work Sheet 46. Placement of Accounts in the Work Sheet
R.P. Cline, Capital R.P. Cline, Drawing - + + - Debit Credit Balance Debit Balance Credit 47. Placement of Accountsin the Work Sheet(contd)
48. Placement of Accountsin the Work Sheet(contd)
49. Calculating Net Income E R 50. Complete a Work Sheetfor a Service Enterprise 51. Steps to Complete Work Sheet
52. Steps to Complete Work Sheet(contd)
53. Steps to Complete Work Sheet(contd)
54. Work Sheets with Two Pages
55. Finding Errors in Income Statement and Balance Sheet Columns
56. Performance Objective 4
Royalty Free PhotoDisc Blue/ Getty Images 57. Income Statement
58. Statement of Owners Equity
59. Statement of Owners Equity(contd) 60. Balance Sheet
61. Balance Sheet(contd) 62. Performance Objective 5
Royalty Free PhotoDisc Blue/ Getty Images 63. Why Journalize and Post?
64. Ethics Discussion
If investors or managers rely on this months financial statements for decision making, the income statement will overstate income by the amount of unrecorded depreciation. 65. Journal Entries Be sure to write Adjusting Entriesbefore you begin the entries. 66. Post the Journal Entries Be sure to write Adjusting in the Item column. 67. Performance Objective 6
68. An Income Statement Involving MoreThan One Revenue Account and a Net Loss 69. A Statement of Owners Equity with an Additional Investment and Net Income 70. A Statement of Owners Equity with an Additional Investment and a Net Loss 71. An Income Statement with More Than One Depreciation Expense Account 72. A Balance Sheet with More Than One Accumulated Depreciation Account 73. Internet Research
The company depreciates buildings and improvements; machinery, equipment, and furniture; transportation equipment; and computer software and equipment.http://www.ncilp.com/nci/investor_relations.htm 74. A Balance Sheet ContainingStatement of Owners Equity Information 75. Review Question
A. fiscal period is any period of time covering a complete accounting cycle. A fiscal year is always twelve months, but does not have to coincide with the calendar year. 76. Review Question
A. Trial Balance, Adjustments, Adjusted Trial Balance, Income Statement, and Balance Sheet 77. Review Question
A. Depreciation Expense and Accumulated Depreciation 78. Review Question
A. Recognition of an expense or a revenue that has been incurred (expense) or earned (revenue) but has not yet been recorded 79. Demonstration Problem
80. DR CR DR CR DR CR DR CR Cash 4,381.00 Accounts Receivable 578.00 Prepaid Property Insurance 397.00 Prepaid Auto Insurance 1,138.00 Equipment 5,713.00 Accumulated Depreciation, Equipment 2,487.00 Accounts Payable 997.00 S. Colfeld, Capital 5,964.00 S. Colfeld, Drawing 18,000.00 Professional Fees 38,331.00 Salary Expense 16,000.00 Advertising Expense 887.00 Utilities Expense 685.00 47,779.00 47,779.00 Colfeld Company Work Sheet For Year Ended June 30, 2007 Adjustments Balance Sheet Trial Balance Adjusted Trial Balance Income Statement Account Name CR DR 81. Adjustment Data 82. DR CR DR CR DR CR DR CR Cash 4,381.00 Accounts Receivable 578.00 Prepaid Property Insurance 397.00 a) 200.00 Prepaid Auto Insurance 1,138.00 Equipment 5,713.00 Accumulated Depreciation, Equipment 2,487.00 Accounts Payable 997.00 S. Colfeld, Capital 5,964.00 S. Colfeld, Drawing 18,000.00 Professional Fees 38,331.00 Salary Expense 16,000.00 Advertising Expense 887.00 Utilities Expense 685.00 47,779.00 47,779.00 Property Insurance Expense a) 200.00 Income Statement Account Name CR DR Colfeld Company Work Sheet For Year Ended June 30, 2007 Adjustments Balance Sheet Trial Balance Adjusted Trial Balance 83. DR CR DR CR DR CR DR CR Cash 4,381.00 Accounts Receivable 578.00 Prepaid Property Insurance 397.00 a) 200.00 Prepaid Auto Insurance 1,138.00 b) 100.00 Equipment 5,713.00 Accumulated Depreciation, Equipment 2,487.00 Accounts Payable 997.00 S. Colfeld, Capital 5,964.00 S. Colfeld, Drawing 18,000.00 Professional Fees 38,331.00 Salary Expense 16,000.00 Advertising Expense 887.00 Utilities Expense 685.00 47,779.00 47,779.00 Property Insurance Expense a) 200.00 Auto Insurance Expense b) 100.00 Colfeld Company Work Sheet For Year Ended June 30, 2007 Adjustments Balance Sheet Trial Balance Adjusted Trial Balance Income Statement Account Name CR DR 84. DR CR DR CR DR CR DR CR Cash 4,381.00 Accounts Receivable 578.00 Prepaid Property Insurance 397.00 a) 200.00 Prepaid Auto Insurance 1,138.00 b) 100.00 Equipment 5,713.00 Accumulated Depreciation, Equipment 2,487.00 c) 500.00 Accounts Payable 997.00 S. Colfeld, Capital 5,964.00 S. Colfeld, Drawing 18,000.00 Professional Fees 38,331.00 Salary Expense 16,000.00 Advertising Expense 887.00 Utilities Expense 685.00 47,779.00 47,779.00 Property Insurance Expense a) 200.00 Auto Insurance Expense b) 100.00 Depreciation Expense, Equipment c) 500.00 DR Colfeld Company Work Sheet For Year Ended June 30, 2007 Adjustments Balance Sheet Trial Balance Adjusted Trial Balance Income Statement Account Name CR 85. DR CR DR CR DR CR DR CR Cash 4,381.00 Accounts Receivable 578.00 Prepaid Property Insurance 397.00 a) 200.00 Prepaid Auto Insurance 1,138.00 b) 100.00 Equipment 5,713.00 Accumulated Depreciation, Equipment 2,487.00 c) 500.00 Accounts Payable 997.00 S. Colfeld, Capital 5,964.00 S. Colfeld, Drawing 18,000.00 Professional Fees 38,331.00 Salary Expense 16,000.00 d) 400.00 Advertising Expense 887.00 Utilities Expense 685.00 47,779.00 47,779.00 Property Insurance Expense a) 200.00 Auto Insurance Expense b) 100.00 Depreciation Expense, Equipment c) 500.00 Salaries Payable d) 400.00 1,200.00 1,200.00 CR DR Colfeld Company Work Sheet For Year Ended June 30, 2007 Adjustments Balance Sheet Trial Balance Adjusted Trial Balance Income Statement Account Name 86. Extend the amounts in the Trial Balance columns and the Adjustments columns to the Adjusted Trial Balance columns. 87. DR CR DR CR DR CR DR CR Cash 4,381.00 4,381.00 Accounts Receivable 578.00 578.00 Prepaid Property Insurance 397.00 a) 200.00 197.00 Prepaid Auto Insurance 1,138.00 b) 100.00 1,038.00 Equipment 5,713.00 5,713.00 Accumulated Depreciation, Equipment 2,487.00 c) 500.00 2,987.00 Accounts Payable 997.00 997.00 S. Colfeld, Capital 5,964.00 5,964.00 S. Colfeld, Drawing 18,000.00 18,000.00 Professional Fees 38,331.00 38,331.00 Salary Expense 16,000.00 d) 400.00 16,400.00 Advertising Expense 887.00 887.00 Utilities Expense 685.00 685.00 47,779.00 47,779.00 Property Insurance Expense a) 200.00 200.00 Auto Insurance Expense b) 100.00 100.00 Depreciation Expense, Equipment c) 500.00 500.00 Salaries Payable d) 400.00 400.00 1,200.00 1,200.00 48,679.00 48,679.00 Account Name CR DR Colfeld Company Work Sheet For Year Ended June 30, 2007 Adjustments Balance Sheet Trial Balance Adjusted Trial Balance Income Statement 88. Carry the appropriate amounts to either the Income Statement columns or the Balance Sheet columns. Then calculate net income or net loss. 89. DR CR DR CR DR CR DR CR Cash 4,381.00 4,381.00 Accounts Receivable 578.00 578.00 Prepaid Property Insurance 397.00 a) 200.00 197.00 Prepaid Auto Insurance 1,138.00 b) 100.00 1,038.00 Equipment 5,713.00 5,713.00 Accumulated Depreciation, Equipment 2,487.00 c) 500.00 2,987.00 Accounts Payable 997.00 997.00 S. Colfeld, Capital 5,964.00 5,964.00 S. Colfeld, Drawing 18,000.00 18,000.00 Professional Fees 38,331.00 38,331.00 38,331.00 Salary Expense 16,000.00 d) 400.00 16,400.00 16,400.00 Advertising Expense 887.00 887.00 887.00 Utilities Expense 685.00 685.00 685.00 47,779.00 47,779.00 Property Insurance Expense a) 200.00 200.00 200.00 Auto Insurance Expense b) 100.00 100.00 100.00 Depreciation Expense, Equipment c) 500.00 500.00 500.00 Salaries Payable d) 400.00 400.00 1,200.00 1,200.00 48,679.00 48,679.00 18,772.00 38,331.00 Income Statement Account Name CR DR Colfeld Company Work Sheet For Year Ended June 30, 2007 Adjustments Balance Sheet Trial Balance Adjusted Trial Balance 90. DR CR DR CR DR CR DR CR Cash 4,381.00 4,381.00 4,381.00 Accounts Receivable 578.00 578.00 578.00 Prepaid Property Insurance 397.00 a) 200.00 197.00 197.00 Prepaid Auto Insurance 1,138.00 b) 100.00 1,038.00 1,038.00 Equipment 5,713.00 5,713.00 5,713.00 Accumulated Depreciation, Equipment 2,487.00 c) 500.00 2,987.00 2,987.00 Accounts Payable 997.00 997.00 997.00 S. Colfeld, Capital 5,964.00 5,964.00 5,964.00 S. Colfeld, Drawing 18,000.00 18,000.00 18,000.00 Professional Fees 38,331.00 38,331.00 38,331.00 Salary Expense 16,000.00 d) 400.00 16,400.00 16,400.00 Advertising Expense 887.00 887.00 887.00 Utilities Expense 685.00 685.00 685.00 47,779.00 47,779.00 Property Insurance Expense a) 200.00 200.00 200.00 Auto Insurance Expense b) 100.00 100.00 100.00 Depreciation Expense, Equipment c) 500.00 500.00 500.00 Salaries Payable d) 400.00 400.00 400.00 1,200.00 1,200.00 48,679.00 48,679.00 18,772.00 38,331.00 29,907.00 10,348.00 Colfeld Company Work Sheet For Year Ended June 30, 2007 Adjustments Balance Sheet Trial Balance Adjusted Trial Balance Income Statement Account Name CR DR 91. DR CR DR CR DR CR DR CR Cash 4,381.00 4,381.00 4,381.00 Accounts Receivable 578.00 578.00 578.00 Prepaid Property Insurance 397.00 a) 200.00 197.00 197.00 Prepaid Auto Insurance 1,138.00 b) 100.00 1,038.00 1,038.00 Equipment 5,713.00 5,713.00 5,713.00 Accumulated Depreciation, Equipment 2,487.00 c) 500.00 2,987.00 2,987.00 Accounts Payable 997.00 997.00 997.00 S. Colfeld, Capital 5,964.00 5,964.00 5,964.00 S. Colfeld, Drawing 18,000.00 18,000.00 18,000.00 Professional Fees 38,331.00 38,331.00 38,331.00 Salary Expense 16,000.00 d) 400.00 16,400.00 16,400.00 Advertising Expense 887.00 887.00 887.00 Utilities Expense 685.00 685.00 685.00 47,779.00 47,779.00 Property Insurance Expense a) 200.00 200.00 200.00 Auto Insurance Expense b) 100.00 100.00 100.00 Depreciation Expense, Equipment c) 500.00 500.00 500.00 Salaries Payable d) 400.00 400.00 400.00 1,200.00 1,200.00 48,679.00 48,679.00 18,772.00 38,331.00 29,907.00 10,348.00 Net Income 19,559.00 38,331.00 38,331.00 DR Colfeld Company Work Sheet For Year Ended June 30, 2007 Adjustments Balance Sheet Trial Balance Adjusted Trial Balance Income Statement Account Name CR 92. DR CR DR CR DR CR DR CR Cash 4,381.00 4,381.00 4,381.00 Accounts Receivable 578.00 578.00 578.00 Prepaid Property Insurance 397.00 a) 200.00 197.00 197.00 Prepaid Auto Insurance 1,138.00 b) 100.00 1,038.00 1,038.00 Equipment 5,713.00 5,713.00 5,713.00 Accumulated Depreciation, Equipment 2,487.00 c) 500.00 2,987.00 2,987.00 Accounts Payable 997.00 997.00 997.00 S. Colfeld, Capital 5,964.00 5,964.00 5,964.00 S. Colfeld, Drawing 18,000.00 18,000.00 18,000.00 Professional Fees 38,331.00 38,331.00 38,331.00 Salary Expense 16,000.00 d) 400.00 16,400.00 16,400.00 Advertising Expense 887.00 887.00 887.00 Utilities Expense 685.00 685.00 685.00 47,779.00 47,779.00 Property Insurance Expense a) 200.00 200.00 200.00 Auto Insurance Expense b) 100.00 100.00 100.00 Depreciation Expense, Equipment c) 500.00 500.00 500.00 Salaries Payable d) 400.00 400.00 400.00 1,200.00 1,200.00 48,679.00 48,679.00 18,772.00 38,331.00 29,907.00 10,348.00 Net Income 19,559.00 19,559.00 38,331.00 38,331.00 29,907.00 29,907.00 CR DR Colfeld Company Work Sheet For Year Ended June 30, 2007 Adjustments Balance Sheet Trial Balance Adjusted Trial Balance Income Statement Account Name 93. Prepare an Income Statement Revenue: Professional Fees $38,331.00 Expenses: Salary Expense $16,400.00 Advertising Expense 887.00 Utilities Expense 685.00 Property Insurance Expense 200.00 Auto Insurance Expense 100.00 Depreciation Expense, Equipment 500.00 Total Expenses 18,772.00 Net Income $19,559.00 For Year Ended June 30, 2007 Colfeld Company Income Statement 94. Prepare a Statement of Owners Equity S. Colfeld, Capital, July 1, 2006 $5,964.00 Net Income for the Year $19,559.00 Less Withdrawals 18,000.00 Increase in Capital 1,559.00 S. Colfeld, Capital, June 30, 2007 $7,523.00 Colfeld Company Statement of Owner's Equity For Year Ended June 30, 2007 95. Prepare a Balance Sheet Assets Cash $4,381.00 Accounts Receivable 578.00 Prepaid Property Insurance 197.00 Prepaid Auto Insurance 1,038.00 Equipment $5,713.00 Accumulated Depreciation, Equipment 2,987.00 2,726.00 Total Assets $8,920.00 Liabilities Accounts Payable $997.00 Salaries Payable 400.00 Total Liabilities $1,397.00 Owner's Equity S. Colfeld, Capital 7,523.00 Total Liabilities & Owner's Equity $8,920.00 Colfeld Company Balance Sheet June 30, 2007 96. Journalize the Adjusting Entries Description Post. Ref. Debit Credit 1 Adjusting Entries 2 2007 3 June 30 Property Insurance Expense 200.00 4 Prepaid Property Insurance 200.00 5 6 7 8 9 10 11 12 13 14 General Journal Date Page 43 Line # 97. Journalize the Adjusting Entries(contd) Description Post. Ref. Debit Credit 1 Adjusting Entries 2 2007 3 June 30 Property Insurance Expense 200.00 4 Prepaid Property Insurance 200.00 5 6 30 Auto Insurance Expense 100.00 7 Prepaid Auto Insurance 100.00 8 9 10 11 12 13 14 General Journal Date Page 43 Line # 98. Journalize the Adjusting Entries(contd) Description Post. Ref. Debit Credit 1 Adjusting Entries 2 2007 3 June 30 Property Insurance Expense 200.00 4 Prepaid Property Insurance 200.00 5 6 30 Auto Insurance Expense 100.00 7 Prepaid Auto Insurance 100.00 8 9 30 Depreciation Expense, Equipment 500.00 10 Accumulated Depreciation, Equipment 500.00 11 12 13 14 General Journal Date Page 43 Line # 99. Journalize the Adjusting Entries(contd) Description Post. Ref. Debit Credit 1 Adjusting Entries 2 2007 3 June 30 Property Insurance Expense 200.00 4 Prepaid Property Insurance 200.00 5 6 30 Auto Insurance Expense 100.00 7 Prepaid Auto Insurance 100.00 8 9 30 Depreciation Expense, Equipment 500.00 10 Accumulated Depreciation, Equipment 500.00 11 12 30 Salary Expense 400.00 13 Salaries Payable 400.00 14 General Journal Date Page 43 Line # 100. Chapter Review
101. Chapter Review(contd)
102. Chapter Review(contd)