Chapter 11
WORK SHEET AND
ADJUSTING ENTRIES
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Accounting Language
• 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.
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Review
Insurance expired, $3,600. (The amount expired is the
amount used.)
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Review
Additional depreciation, $1,800. (Add to both accounts)
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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).
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Learning Objective
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Adjustment for Unearned Revenue
• ________________ 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 __________.
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Adjustment for Unearned Revenue
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.
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Adjustment for Unearned Revenue
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.
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 “______________ .
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Adjustment for Unearned Revenue
• 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.
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Practice Exercise 1
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Learning Objective
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Adjustment for Merchandise Inventory Using
the _________ Inventory System
• 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.
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Adjustment for Merchandise Inventory Using
the _________ Inventory System
Step 1: _____________________
___________________________
___________________________
___________________________
___________________________
Step 2: _____________________
________________________
___________________________
_____________________
________________________
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 _______ _______ .
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Practice Exercise 2
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Learning Objective
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Data for the Adjustments
a. (and b) Ending merchandise
inventory, $64,800. The
adjustments for inventory
generally are placed first.
c. Course fees earned, $800.
d. Supplies used, $1,125.
e. Insurance expired, $520.
f.
Additional year’s depreciation
of building, $3,500.
g. Additional year’s depreciation
of equipment, $4,900.
h. Wages owed but not paid to
employees at end of year,
$1,030.
© 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.
© 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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© 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.
© 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.
© 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
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Completion of the Work Sheet
• 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.
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Completion of the Work Sheet
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Completion of the Work Sheet
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Completion of the Work Sheet
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Practice Exercise 4
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11-32
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© 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
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Practice Exercise 5
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© 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.
11-38
Learning Objective
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Adjustment for Merchandise Inventory Using
the __________ Inventory System - _________
• 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 ___________
___________.
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Adjustment for Merchandise Inventory Using
the __________ Inventory System - _________
• 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.
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Example: Physical count = computer record of inventory
(1) – A firm that has a beginning inventory of $75,000
bought merchandise on account, $50,000.
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Example: Physical count = computer record of inventory
(2) – Sold merchandise on account for $84,000 having
a cost of $60,300.
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Example: Physical count = computer record of inventory
(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).
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Example: Physical count = computer record of inventory
(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).
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Comparison of Periodic and Perpetual Systems
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Practice Exercise 6
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