Question

During the year, an enterprise fund had a number of transactions that affected the various net positions of the fund. You should analyze the transactions in the grid below, and the record the adjusting entries. The first transaction is analyzed for you as an example.

1.  Net income for the year was $250,000.

2. Depreciation expenses for the year totaled $93,000.

3. Equipment with a carrying amount of $324,000 was sold for $398,000.

4. Principal payments of $96,000 were made on debt incurred to acquire plant and equipment.

5. New equipment was purchased for $100,000 in cash and a note payable of $373,000.

6.  Bonds in the amount of $5,000,000 were issued to finance construction. At the end of the year, the project was incomplete, with costs incurred so far of $1,900,000.

Clearly show how you computed the amount of the adjustment.

Journal entry to adjust unrestricted net assets:

Journal entry to adjust net investment in capital assets:

Journal entry to adjust restricted net assets.

Answer 1

Hey there !!

In this question, we are supposed to pass the journal entries for the various adjustments...so let me help you with it and also with the calculation of the amount of adjustment !!

Let's go :)

	Particulars	Debit ($)	Credit ($)
1	Depreciation Expense A/c	93,000
	To Profit and Loss A/c		93,000
	(being depreciation charged during the year )
2	Bank A/c	3,98,000
	To Equipment A/c		3,24,000
	To Profit on Sale of Equipment		74,000
	(being equipment sold at profit)
3	Loan for P&M	96,000
	To Bank A/c		96,000
	(pincipal repayment for loan taken)
4	Equipment A/c	4,73,000
	To Cash A/c		1,00,000
	To Account Payables		3,73,000
	(new equipment purchased )
5	Bank A/c	50,00,000
	To Bonds Payable A/c		50,00,000
	(to bonds issued)
6	Construction Contract A/c	19,00,000
	To Cost of construction		19,00,000
	(being construction cost transferred to Contract account)

Working Notes showing Calculation of Adjustment Entries

1	Profit on Sale of Equipment
	Sale Price of Equipment	3,98,000
	Carrying value of Equipment	-3,24,000
	Profit	74,000
2	Purchase of New Equipment
	Payment made in cash	1,00,000
	Account Payable	3,73,000
	Total Amount	4,73,000

For other adjustment entries, amount is directly specified in the question itself...

I hope the question is now clear to you ... if you have any queries with respect to adjustment entries, do let me know....all the best !!! :)