Question

Adjusting Entry for Accrued Fees

1.

At the end of the current year, $7,100 of fees have been earned but have not been billed to clients.

a. Journalize the adjusting entry to record the accrued fees.

b. If the cash basis rather than the accrual basis had been used, would an adjusting entry have been necessary?

2.

Garcia Realty Co. pays weekly salaries of $28,000 on Friday for a five-day workweek ending on that day.

a. Journalize the necessary adjusting entry at the end of the accounting period assuming that the period ends on Monday.

b. Journalize the necessary adjusting entry at the end of the accounting period assuming that the period ends on Tuesday.

3.

The balance in the supplies account, before adjustment at the end of the year, is $2,170.

Journalize the adjusting entry required if the amount of supplies on hand at the end of the year is $1,020.

4.

The estimated amount of depreciation on equipment for the current year is $1,520. Journalize the adjusting entry to record the depreciation.

5.

Determining Fixed Asset's Book Value

The balance in the equipment account is $3,000,000, and the balance in the accumulated depreciation—equipment account is $1,620,000.

a. What is the book value of the equipment?
$

b. Does the balance in the accumulated depreciation account mean that the equipment's loss of value is $1,620,000?
, because depreciation is an allocation of the   of the equipment to the periods benefiting from its use.

Answer 1

1. Adjusting Entry for Accrued Fees

a. Under accrual basis, journal entry will be

Accrued fee $7,100

Client $7,100

b. No entry required for accrued fees in case of cash basis because the income is recognised only when the cash is received.

2. Adjusting Entry for Salary Payable:

a. If the period ends on Monday

Salary for Monday = ($28,000/5) * 1 = $5,600

Journal Entry:

Salary Expense $5,600

Salary Payable $5,600

b. If the period ends on Tuesday

Salary upto Tuesday = ($28,000/5) * 2 = $11,200

Journal Entry:

Salary Expense $11,200

Salary Payable $11,200

3. There is a decrease in the value of supplies by $1,150 ($2,170 - $1,020). The journal entry for the same is recorded as

Supplies expense $1,150

Supplies $1,150

4. Adjusting entry to record depreciation

Depreciation on equipment $1,520

Accumulated Depreciation on equipment    $1,520

5.

a. Book value of the equipment = Cost - Accumulated Depreciation

= $3,000,000 - 1,620,000

= $1,380,000

b. The answer is no. The balance in accumulated depreciation account does not mean equipment's loss of value. Depreciation is an allocation of the equipment to the periods benefiting from its use.