In An Excel Spreadsheet Configured Like A Journal

In An Excel Spreadsheet Configured Similarly To the Journal Shown Belo

In an Excel spreadsheet configured similarly to the journal shown below, prepare year-end adjustments to the following situations. Omit explanations. Accrued interest on notes receivable is $105. Of the $12,000 received in advance of earning a service, one-third was still unearned by year end. Three years' rent, totaling $36,000, was paid in advance at the beginning of the year. Services totaling $5,300 had been performed, but not yet billed. Depreciation on trucks totaled $3,400 for the year. Supplies available for use totaled $690. However, by year end, only $100 in supplies remained. Payroll for the five-day work week, to be paid on Friday, is $30,000. Year end falls on a Monday.

Paper For Above instruction

The following paper provides the necessary year-end adjusting entries based on the given accounting scenarios, following standard accounting principles to ensure that financial statements accurately reflect the company's financial position as of year-end.

Introduction

Year-end adjustments are crucial in accrual accounting to ensure that revenues and expenses are recognized in the correct period, thus providing an accurate representation of an entity’s financial health. This paper considers multiple typical adjustments: accrued interest, unearned revenue recognition, prepaid rent allocation, accrued service revenue, depreciation expense, supplies expense, and accrued payroll.

Interest Receivable Adjustment

The company earned $105 in interest on notes receivable that had not yet been received by the end of the year. Since interest income is earned periodically, the adjusting entry recognizes this interest revenue that has accrued but remains uncollected. The journal entry is:

Debit Interest Receivable $105

Credit Interest Revenue $105

This adjustment ensures that interest income is properly reflected in the period it was earned, aligning with the matching principle.

Unearned Revenue Adjustment

Out of $12,000 received in advance for services, one-third remains unearned at year-end, which amounts to $4,000 ($12,000 x 1/3). The original receipt would have been recorded as a liability, such as Unearned Revenue. To recognize the earned portion:

Debit Unearned Revenue $8,000

Credit Service Revenue $8,000

The remaining unearned amount ($4,000) continues to be classified as a liability, reflecting revenue not yet earned.

Prepaid Rent Adjustment

Prepaid rent of $36,000 covers three years, so annual rent expense equals $12,000 ($36,000 / 3). Recognizing this expense for the current year:

Debit Rent Expense $12,000

Credit Prepaid Rent $12,000

This ensures the rent expense aligns with the period it applies to, matching expense recognition to benefit received.

Accrued Service Revenue

Services performed but not yet billed amount to $5,300. Recognizing this revenue:

Debit Accounts Receivable $5,300

Credit Service Revenue $5,300

This adjustment records receivables for services rendered but not billed at year-end, complying with revenue recognition standards.

Depreciation Expense

The depreciation on trucks totals $3,400 for the year. This recorded depreciation allocates the truck’s cost over its useful life:

Debit Depreciation Expense $3,400

Credit Accumulated Depreciation—Trucks $3,400

This adjustment ensures the declining value of the trucks is properly reflected in the financial statements.

Supplies Expense

Supplies on hand at year-end total $100, but supplies available for use amounted to $690. The supplies used are then:

Supplies used = $690 - $100 = $590

The journal entry:

Debit Supplies Expense $590

Credit Supplies $590

This records the consumption of supplies during the period.

Accrued Payroll

Payroll for the five-day work week is $30,000, and since year-end falls on a Monday, the payroll accrued for the weekend (assuming a five-day workweek with payments on Friday) is for two days (Saturday and Sunday). If daily payroll cost is $6,000 ($30,000 / 5 days), then:

Payroll accrued = $6,000 x 2 days = $12,000

The adjusting entry:

Debit Salaries and Wages Expense $12,000

Credit Salaries and Wages Payable $12,000

This adjustment accrues employee wages for the weekend, which will be paid in the upcoming payroll.

Conclusion

These adjusting entries ensure that financial statements as of year-end accurately record all earned revenues and incurred expenses, including accruing revenues and expenses, allocating prepaid amounts properly, and recognizing depreciation. Proper adjustments uphold the principles of revenue recognition and expense matching, providing stakeholders with a faithful view of the company's financial condition.

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