Question

 

Errors and Adjusting Entries Use the following information to record necessary end of period journal entries:

A man came into Cutting Edge on 31 March 2020 to pay for repairs to his mower which he will bring in later. He paid $2,500 cash. The mower was arranged to be delivered to Cutting Edge on 10 April, 2020.

 Repair services of $6,250 were provided on 31 March 2020 but have not yet been recorded in the transactions. Payment has not yet been received.

 Billy-Bob did a count of the stock on hand of Workshop Supplies. He realised that only $5,500 of Workshop Supplies were used in March, instead of $7,000 as recorded on 31 March 2020 (in Practice Set 2).

 Jimmy-James’ last wages payment was on Friday 20 March. The next $1,000 fortnightly payment is on Friday 3 April. Jimmy-James only works Monday to Friday, being 10 days per fortnight.

 Annual insurance of $1,200 was paid on 1 February and recorded in the Prepaid Insurance account.

 From all sources of revenue (Sales Revenue and Service Revenue), $70,730 was cash sales.

 Add any other necessary adjusting entries based on the information provided under the accounting policies and procedures.

Answer 1

S. NO.	Situation	Explanation	Journal Entry
1	A man came into Cutting Edge on 31 March 2020 to pay for repairs to his mower which he will bring in later. He paid $2,500 cash. The mower was arranged to be delivered to Cutting Edge on 10 April, 2020	Here, in the situation Man comes to avail the service of repair to his mower, however Man has paid repair charges in advance to cutting edge. Same shall be booked as Advance Payment under unearned revenue.	Cash A/c Dr.    2500 $ Unearned Revenue A/c Cr. 2500 $
2	Repair services of $6,250 were provided on 31 March 2020 but have not yet been recorded in the transactions. Payment has not yet been received	Services shall be recorded once performance obligation is satisfied, and it is 100% sure that consideration will be paid by the contractee. So, it ie irrespective of the fact while recording the revenue whether payment has been received or not.	Debtors A/c Dr. 6250 $ To Sale Revenue A/c 6250$
3	Billy-Bob did a count of the stock on hand of Workshop Supplies. He realised that only $5,500 of Workshop Supplies were used in March, instead of $7,000 as recorded on 31 March 2020 (in Practice Set 2)	In this case, 5500 is charged to COGS and balance will be refleced as Closing Stocks in books of Accounts. Reversal of COGS entry is required to pass on.	Inventory A/c Dr. 1500 $ COGS A/c Cr. 1500$
4	Jimmy-James’ last wages payment was on Friday 20 March. The next $1,000 fortnightly payment is on Friday 3 April. Jimmy-James only works Monday to Friday, being 10 days per fortnight.	Fortnightly Payment composed of 1000 $, and 10 Days cummulative work. SO for three days of April Month i.e 03 days shall be charged in the month of April 2020. And for 07 Days shall be stand payable in books of accounts. 1000 X 07 Days /10 = 700 for March endded, while for 03 days 300 charged in March 2021 ended.	Wages Expenses A/c Dr. 700 $ Wages Payable A/c Cr. 700$
5	Annual insurance of $1,200 was paid on 1 February and recorded in the Prepaid Insurance account.	So, for the period of two months ( February and March ) amount of 1200/12 = 100 X 02 Months = 200 shall be charged to income statemnet and balance amount of 1000 Shall be shown as prepaid Insurance in Books of March 2020.	Insurance Expenses A/c Dr. 200$ Prepaid Insurance A/c Cr. 200 $
6	From all sources of revenue (Sales Revenue and Service Revenue), $70,730 was cash sales.	So, simply booked as Cash Sales of 70730 and credit the Sales Revenue. If any Advance recipt is made against such services earlier shall be knock off. No debtor a/c will stand debited.	Cash A/c Dr.    70730 $ Cash Sales Cr. 70730 $