Question

In: Accounting

You need to make adjusting entries for Skólavörðustígur Company. What source documents would you refer to...

You need to make adjusting entries for Skólavörðustígur Company. What source documents would you refer to for each of the following items.

Supplies

Interest on Auto Loan

Depreciation on Truck

Accrual of Unpaid Salaries

Converting prepaid insurance to insurance expense.

Solutions

Expert Solution

Supplies:

It requires adjusting entry at the end of the period: supplies expense is debit, supplies account is credit.

Source document: requisition slip is required for making such adjustment. Such slip indicates supplies issued for production during the period.

Interest on auto loan:

Adjusting entry: Interest expense is debit, interest payable is credit.

Source document: loan agreement is the source document. Such document indicates the date of actual payment. Adjusting entry is required at the end of year when the actual payment date is not yet come.

Depreciation on truck:

Adjusting entry: Depreciation expense is debit, accumulated depreciation is credit.

Source document: the book of information about truck is source document. It indicates life of the truck, which is required to calculate the rate of depreciation.

Accrual or unpaid salaries:

Adjusting entry: Salaries expense is debit, salaries payable is credit.

Source document: time card is the source document. It indicates hours of work by an employee for which the salary is due to be paid and required an adjusting entry.

Converting prepaid insurance to insurance expense:

Adjusting entry: Insurance expense is debit, prepaid insurance is credit.

Source document: balance sheet is the source document, where the amount of prepaid insurance is reflected in the “current assets” section.


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