Question

Credit Debit 4,362.00 4, 362.00 4,900.00 4,900.00 1,410.ee 1,410.08 14,500.00 14,500.00 2019 (Adjustment a) Dec. 31 Uncollectible Accounts Expense Allowance for Doubtful Accounts To record estimated loss from Uncollectible accounts based on 0.6% of net credit sales, $727,000 (Adjustment b) 31 Supplies Expense Supplies To record supplies used during the year (Adjustment ) 31 Insurance Expense Prepaid Insurance To record expired insurance on 1-year $5,640 policy purchased on Oct. 1 (Adjustment d) 31 Depreciation. Exp.-Store Equipment Accum. Depreciation-Store Equip. To record depreciation (Adjustment e) 31 Salaries Expense-Office Salaries Payable To record accrued salaries for Dec. 29-31 (Adjustment f) 31 Payroll Taxes Expense Social Security Tax Payable Medicare Tax Payable To record accrued payroll taxes on accrued salaries: social security, 6.2% X 3,000 = $186.00; Medicare, 1.45% x 3,000 = $43.50 (Adjustment g) 31 Interest Expense Interest Payable To record accrued interest on a 4-month, 6% trade note payable dated Nov. 1: $22,000 x 0.06 * 2/12 - $220.00 (Adjustment h) 31 Interest Receivable Interest Income To record interest earned on 6-month, 8% note receivable dated 3,800.00 3,000.00 229.50 186.00 43.50 220.00 220.00 264.00 264.00

Answer 1

Solution

Reversing Entries that should be recorded in the general journal as of January 1, 2020:

Date	Account Title	Debit	Credit
Jan1, 2020	Salaries Payable	$3,000
	Salaries Expense – Office		$3,000
	(To record reversing entry for salaries payable)
Jan1, 2020	Social Security Tax Payable	$186
	Medicare Tax Payable	$43.50
	Payroll Taxes Expense		$229.50
	(reversing entry for payroll taxes)
Jan1, 2020	Interest Payable	$220
	Interest Expense		$220
	(To record reversing entry for accrued interest)
Jan1, 2020	Interest Income	$264
	Interest Receivable		$264
	(To record reversing entry for accrued income)

Notes:

Normally reversing entries are used to reverse adjusting entries relating to accrued expenses and accrued incomes.

No reversing entry is needed for adjustment a., relating to uncollectible accounts expense. This entry is reversed only when a customer ends up paying the previously written of bad debts expense.

No reversing entry is needed for supplies and supplies expense. This adjusting entry is not related to accruals, but rather aims to record the cost of supplies used during the period.

No reversing entry is needed for insurance expense and prepaid insurance. The adjusting entry is again not related to accruals but rather aims to recognize the expired portion of prepaid insurance for the period.

No reversing entry is needed for depreciation expense and accumulated depreciation. The adjusting entry is not related to accruals but aims to write off a portion of asset cost to record as cost of the use of the asset during the period.

Salaries payable and salaries expense need reversing entry as this relates to accrued expense. The reversing entry is automatically adjusted when the actual payment is made.

Adjustment for accrued payroll taxes needs a reversing entry as this relates to accrued payroll taxes for the period.

Adjustment for interest expense needs reversing entry as this relates to accrued interest expense.

Adjustment for interest income needs reversing entry, as this relates to accrued income. The reversing entry is adjusted on actual receipt of the interest income.