Management-Financial Accounting

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|LO 5 | |PROBLEM 4-3 ADJUSTING ENTRIES—ANNUAL ADJUSTMENTS |

1. Adjusting entries:

a. Depreciation Expense 2,950

Accumulated Depreciation 2,950

To record annual depreciation expense:

($15,000 – $250)/5 years.

Assets = Liabilities + Owners’ Equity

–2,950 –2,950

b. Supplies Expense 19,350

Supplies on Hand 19,350

To record supplies used during year:

$3,600 + $17,600 – $1,850.

Assets = Liabilities + Owners’ Equity

–19,350 –19,350

c. Customer Deposits 20,000

Fees Earned 20,000

To record customer deposits earned

between August and December:

($24,000/6 months) × 5 months.

Assets = Liabilities + Owners’ Equity

–20,000 +20,000

d. Rent Expense 5,400

Prepaid Rent 5,400

To record rent expense for November

through December: $2,700 × 2.

Assets = Liabilities + Owners’ Equity

–5,400 –5,400

e. Interest Expense 3,000

Interest Payable 3,000

To accrue interest payable on note

$200,000 × 9% × 60/360.

Assets = Liabilities + Owners’ Equity

+3,000 –3,000

f. Wage Expense 500

Wages Payable 500

To accrue wages payable at year-end.

Assets = Liabilities + Owners’ Equity

+500 –500

2. Net increase (decrease) in net income from adjustments:

a. Depreciation expense $ (2,950)

b. Supplies expense (19,350)

c. Fees earned 20,000

d. Rent expense (5,400)

e. Interest expense (3,000)

f. Wage expense (500)...