© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. WORK SHEET AND ADJUSTING ENTRIES Chapter 11

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. We have talked about the journals and accounts kept by a merchandising business. Now we take another step toward completing the accounting cycle by presenting the related adjustments and the work sheet. Accounting Language

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Insurance expired, $3,600. (The amount expired is the amount used.) Review

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Additional depreciation, $1,800. (Add to both accounts) Review

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Adjusting Entry Concepts _______________________ – this adjustment could apply to a merchandising, manufacturing, or service business. _______________________ – this adjustment is used ______________ for a merchandising business (for both ______ and _________ inventory methods).

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ________________ is ____ ______ ___ __________ for goods or services to be delivered or performed later. A professional sports team sells tickets in advance A magazine publisher sells subscriptions in advance An ________________ is classified as a __________. Adjustment for Unearned Revenue

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. April 1 – Ressor Publishing Company receives $73,000 in cash for subscriptions paid in advance (crediting Unearned Subscriptions). At the end of the year, Ressor finds that $32,400 of the subscriptions had been earned. Adjustment for Unearned Revenue

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. November 1 – Trey’s Landscape Supply receives $2,400 in fees for a three-month landscape maintenance course (crediting Unearned Course Fees). On December 31, $1,600 (2/3 of $2,400) has been earned. Adjustment for Unearned Revenue Occasionally, there is an accounting “rule of thumb” that is helpful in determining an accounting procedure. Here’s one for unearned revenue: Any account beginning with the word “ ______________” is always a “ ______________.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. If the amount of supplies held at the end of the accounting period is substantial, then an adjustment should be made to ___________ the supplies that were ____ _________ during the accounting period. Adjustment for Unearned Revenue

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Practice Exercise 1

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Under the ________ inventory system, we do not make an entry in the _______________________ account until an actual _______________________ or count of stock of goods on hand has been taken. A firm has a _______________________ balance of $183,000. A count of stock on hand determines the cost of the ending inventory to be $186,000. Adjustment for Merchandise Inventory Using the _________ Inventory System

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Step 1: _____________________ ___________________________ ___________________________ ___________________________ ___________________________ Step 2: _____________________ ________________________ ___________________________ _____________________ ________________________ Adjustment for Merchandise Inventory Using the _________ Inventory System The reason for adjusting the Merchandise Inventory account in these two steps is that both the _______ and _______ amounts appear as distinct figures in the _______ _______ columns of a worksheet, and these columns are used as the basis for preparing the _______ _______.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Practice Exercise 2

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. c.Course fees earned, $800. e.Insurance expired, $520. Data for the Adjustments a.(and b) Ending merchandise inventory, $64,800. The adjustments for inventory generally are placed first. d.Supplies used, $1,125. h.Wages owed but not paid to employees at end of year, $1,030. g.Additional year’s depreciation of equipment, $4,900. f.Additional year’s depreciation of building, $3,500.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Practice Exercise 3

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Learning Objective

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. To reduce the number of columns in the work sheet, the “Adjusted Trial Balance” columns have been eliminated. The account balances after the adjusting entries are carried directly into the “Income Statement” and “Balance Sheet” columns. Completion of the Work Sheet

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Completion of the Work Sheet

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Completion of the Work Sheet

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Completion of the Work Sheet

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Practice Exercise

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Learning Objective

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Practice Exercise 5

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Under the _______ inventory system, a business continually maintains a record of each item in stock. When merchandise is purchased, the ___________ ___________ account (not the _______ account) is debited (for the cost of the merchandise). ___________ ___________ or ______ is credited. If the amount shown by a physical count is less than the computer record, this is called ___________ ___________. Adjustment for Merchandise Inventory Using the __________ Inventory System - _________

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. When merchandise is sold, two journal entries are required. First entry: _________________ or ________ is debited. ________ is credited. Second entry: _________________ is ______ for the ______ of merchandise. _________________ is ______ for the same amount. Adjustment for Merchandise Inventory Using the __________ Inventory System - _________

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Example: Physical count = computer record of inventory (1) (1) – A firm that has a beginning inventory of $75,000 bought merchandise on account, $50,000.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Example: Physical count = computer record of inventory (2) (2) – Sold merchandise on account for $84,000 having a cost of $60,300.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Example: Physical count = computer record of inventory (3a) (3a) – A physical count of inventory revealed that $63,200 was on hand. The perpetual record showed $64,700 ($75,000 + $50,000 ‒ $60,300).

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Example: Physical count = computer record of inventory (3b) (3b) – Suppose, on the other hand, that the physical count of the stock of merchandise ($65,200) were more than the recorded amount ($64,700). The adjusting entry is to debit Merchandise Inventory and credit Cost of Goods Sold for the difference ($65,200 – $64,700 = $500).

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Comparison of Periodic and Perpetual Systems

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Practice Exercise 6

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.