Question

Account	Dr	Cr
Cash	120,000
Accounts Receivable	45,000
Investments	50,000
Inventory	65,000
Prepaid Insurance	10,000
Note Receivable	50,000
Equipment	190,000
Patent	80,000
A/C Payable		58,000
Unearned Revenue		6,000
Bank Loan Payable		100,000
Common Stock		102,000
Retained Earnings		295,000
Dividends	5,000
Sales		1,620,000
Dividend income		3,000
Cost of Goods Sold	1,000,000
Salaries Exp	300,000
Accounting Exp	75,000
Advt Exp	70,000
Rent Exp	100,000
Utilities Exp	20,000
Miscellaneous Expense	4,000
Total	2,184,000	2,184,000

Prepare adjusting journal entries.

a) Audit of cash in bank accounts and on hand reveals that $500 is missing from the company's 20 retail locations

b) A count of inventory indicated an ending balance of $64,750.

c) Dividends of $3000 were declared on investments in marketable securities. These dividends will be received in March.

d) Accounts Receivable, $4000 is estimated to be uncollectible.

e) Salaries of $3500 was earned by employees but not paid.

f) Depreciation for the year was calculated to be $20,000.

g) Interest on the loan payable incurred but not paid was $500.

h) Interest earned on the notes receivable was $2000.

i) Amortization of patent $5000.

j) 1/3 of the prepaid insurance had been used as of this month.

k) Income tax expense was estimated at $3000.

Answer 1

Adjusting Entry Journal

	Accounts Title and Explanation	Debit	Credit
a)	Cash Misappropriation	$500
	Cash		$500
	(Being $500 is missing hence reduced from cash balance)
b)	Cost of goods sold ($65000 - $64750)	$250
	Inventory		$250
	(Being entry done for inventory shrinkage)
c)	Dividend Receivable	$3000
	Dividend Income		$3000
d)	Uncollectible accounts expenses	$4000
	Allowance for doubtful accounts		$4000
	(Uncollectible accounts expensed out)
e)	Salary Expenses	$3500
	Salary Payable		$3500
	(Salary expenses payable)
f)	Depreciation Expenses - Equipment	$20000
	Accumulated Depreciation - Equipment		$20000
	(Depreciation charged on equipment)
g)	Interest expenses	$500
	Interest Payable		$500
	(Interest payable on loan)
h)	Interest Income	$2000
	Interest Receivable		$2000
	(Interest receivable on notes receivable)
i)	Amortisation expenses	$5000
	Accumulated amortisation - Patent		$5000
	(Amortisation done of patent)
j)	Insurance Expenses ($10000*1/3)	$3333.33
	Prepaid Insurance		$3333.33
	(Prepaid expenses expired of this month for $3333.33)
k)	Income Tax expenses	$3000
	Income Tax payable		$3000
	(Income tax expenses payable)

Assumption - Dividend income of $3000 in Trial balance is related to other marketable securities and for adjusting entry, such dividend income of $3000 is on other marketable security.