Accounting 20
Chapter 15 Study Guide
1 FORMAT
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True and False – Concepts/Vocabulary/Terminology/Practice
Multiple Choice – Concepts/Vocabulary/Terminology/Practice
Practical – Journalizing Adjustments
o You will have an unadjusted trial balance.
o You will be given adjustment information to journalize adjustments.
o Possible adjusting entries: uncollectible accounts receivable, merchandise inventory,
office supplies, pre-paid insurance, **notes receivable/interest income/interest
receivable**, plant asset/depreciation
o Federal Income Tax – a tax rate chart will be provided. You will need to calculate the full
amount and then compare it with what has already been accounted for to figure out the
adjusting entry amount.
o IMPORTANT:
 Principle x interest rate x #/360 = Interest for the length of note
 Figure out how much it is per month as well
 You MUST pay attention to when the note was signed. You will more than likely
have to figure out the interest income/interest receivable for an odd period of
time (1 month and a quarter, one month and a half, two months, etc.).
2 CONTENT
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Key Terms:
o Unadjusted trial balance, beginning inventory, ending inventory, accrued revenue,
accrued interest income, current assets, plant assets, depreciation, depreciation
expense, salvage value, useful life, straight-line method of depreciation, accumulated
depreciation, book value of a plant asset, adjusted trial balance, tax bracket, marginal
tax rate
Four questions are asked to analyze the adjustments for supplies.
1. What are the balances of the accounts being adjusted? Unadjusted trial balance
2. What should the blances be for these accounts? Given or you must calculate
3. What must be done to correct the account balances? Calculation – figure out
adjusting amount
4. What adjusting entries are made? Debit/Credit – what?
Straight-Line Method for Depreciation
Note Receivable/Note Payable = equation
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Accounts to use
o Supplies – Office
o Supplies – Store
o Prepaid Insurance
o Prepaid Advertising
o Prepaid Rent
o Interest Income
o Truck - Accumulated Depreciation
o Plant Asset – Accumulated Dep.
o DR?CR?
Merchandising Inventory
Supplies – Office Expense
Supplies – Store Expense
Insurance Expense
Advertising Expense
Rent Expense
Income Receivable
EQUATION!!!
Truck - Depreciation Expense
Plant Asset – Depreciation Expense
Income Summary
Unadjusted Trial Balance
Adjusting Entries
Adjusted Trial Balance
Source: http://www.martybucella.com/account.html
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Steps in accounting cycle – merchandising business:
o Originating data
o Journalizing/General Journal/Special Journals
o Posting (daily and month end)
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Unadjusted Trial balance
Adjusting Entries
Posting of Adjusting Entries/General Ledger
Adjusted Trial Balance prepared from General Ledger
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Worksheet – 10 column worksheet – optional/could be done with adjusting entries step
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Financial statements
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CHAPTER 15
CHAPTER 16
Prepared from Adjusted Trial Balance/10 column worksheet
Income Statement and %
 Sales and sales allowances and returns
 COST OF GOODS SOLD/cost of merchandise
o Beginning inventory, purchases, purchase returns and
allowances, ending inventory, cost of merchandise available and
then sold
 Gross Profit
 Other income and expenses
Statement of Stockholders’ Equity
 Shares – common and preferred
 Retained Earnings
 Dividends
Balance Sheet
 Classified Report Form
 Stockholders’ Equity
Closing Entries (close temporary accounts and prepare the books for a new fiscal period)
Post-Closing trial balance
Reversing Entries (Accounting 30)
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