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Establish Allowance: 12-31-X5 Uncollectible Accounts Expense Allow. for Uncollectible Accounts To add 3% of sales to the allowance account ($2,500,000 X 3% = $75,000) Write-off Account 3-15-X3 Allow. for Uncollectible Accounts Accounts Receivable To write-off of an uncollectible account 1,000 1,000 75,000 75,000
Note: A Gain would be recorded if the sales proceeds exceeded the net book value of the asset sold.
9-30-X1
1,500,000 1,500,000
4,000
Compound Entry to Buy Asset for Cash and Note Illustrative Entry
XX-XX-X9 Land Cash Note Payable Purchased land by giving $5,000 cash, and promising to pay the remainder in 90 days 15,000 5000 10,000
12-31-X1 Accounts Receivable Currency Exchange Gain Year-end adjustment to increase accounts receivable to the spot rate (100,000 pounds X $1.90 spot rate = $190,000; $190,000 - $175,000 = $15,000 gain)
15,000 15,000
2-28-X2
Cash Currency Exchange Loss Accounts Receivable Collected 100,000 pounds and converted them to dollars (100,000 x $1.70 spot rate). Recorded loss for decline in value of receivable since year end ($190,000 vs.$170,000)
If goods are sold F.O.B. shipping point, the purchaser is responsible for paying freight costs incurred in transporting the merchandise from the point of shipment to its destination. Freight cost incurred by a purchaser is called freight-in, and is added to purchases in calculating net purchases: 6-6-X4 Purchases Freight-in Cash Accounts Payable Purchased $8,000 of inventory, terms F.O.B. shipping point, and paid the shipping freight bill of $1,500 8,000 1,500 1,500 8,000
If goods are sold F.O.B. destination, the seller is responsible for costs incurred in moving the goods to their desired destination. Freight cost incurred by the seller is called freight-out, and is reported as a selling expense which is subtracted from gross profit in calculating net income. 5-11-X4 Accounts Receivable Freight-out Cash Sales Sold merchandise on account for $7,000, terms F.O.B. destination, and paid the freight bill of $400 7,000 400 400 7,000
3-31-X6
5,000 5,000
To record a $1 per share decrease in the value of 5,000 shares of Merriam stock
4-30-X6
Available for Sale Securities Unrealized Gain/Loss - OCI To record a $3 per share increase in the value of 5,000 shares of Merriam stock
15,000 50,000
6-30-X3
Cash Investment in Bonds Interest Income To record the receipt of an interest payment ($5,000 par X .05 interest X 6/12 months = $125; $150 discount X 6 months/36 months = $25 amortization)
125 25 150
12-31-X5 Cash Investment in Bonds To record the redemption of bond investment at maturity.
5,000 5,000
6-30-X3
Cash Interest Income To record the receipt of an interest payment ($5,000 par X .05 interest X 6/12 months)
125 125
12-31-X5 Cash Investment in Bonds To record the redemption of bond investment at maturity.
5,000 5,000
6-30-X3
Cash
125
Interest Income Investment in Bonds To record the receipt of an interest payment ($5,000 par X .05 interest X 6/12 months = $125; $300 premium X 6 months/36 months = $50 amortization)
75 50
12-31-X5 Cash Investment in Bonds To record the redemption of bond investment at maturity.
5,000 5,000
6-30-X3
Investment Investment Income To record investor's share of Legg's reported income (25% X $10,000)
2,500 2,5000
7-01-X3
1,000 1,000
dividends from Legg -- Legg declared and paid a total of $4,000 ($4,000 X 25% = $1,000)
3-31-X6
Unrealized Loss on Investments Trading Securities To record a $1 per share decrease in the value of 5,000 shares of Merriam stock
5,000 5,000
4-30-X6
Trading Securities Unrealized Gain on Investments To record a $3 per share increase in the value of 5,000 shares of Merriam stock
15,000 50,000
Illustrative Entries Job Costing To Record Direct Materials, Direct Labor, and Apply Factory Overhead
6-15-X3 6-20-X3 Raw Materials Inventory Accounts Payable To record purchase of raw materials Work in Process Inventory Raw Materials Inventory Salaries Payable Factory Overhead To transfer raw materials to production, record direct labor costs on job, and apply overhead at the predetermined rate Finished Goods Inventory Work in Process Inventory To transfer completed units to finished goods inventory Accounts Receivable Sales To record sale of finished pipe for $25,000 Cost of goods sold Finished Goods Inventory To transfer of finished goods to cost of goods sold 10,000 10,000 18,000 10,000 3,000 5,000
6-21-X3
18,000
18000
25,000 25,000 18,000 18,000
6-25-X3
Accumulated Depreciation Taxes Payable Utilities Payable To record various factory overhead costs
Interest Payable Loan Payable Cash To record repayment of loan and interest (note that $3,000 of the total interest was previously accrued)
Note: The Notes Payable account could have been substituted for Loan Payable
12-31-X8 Interest Expense Discount on Note Payable To record discount amortization Note Payable Cash To record repayment of note
6-1-X1
Notes Receivable Accounts Receivable To record conversion of an account receivable to a note receivable
10,000 10,000
9-1-X1
Cash Interest Income Notes Receivable To record collection of note receivable plus accrued interest of $300 ($10,000 X 12% X 90/360) or, if dishonored:
9-1-X1
Accounts Receivable Interest Income Notes Receivable To record dishonor of note receivable plus accrued interest of $300 ($10,000 X 12% X 90/360)
7-31-XX
Payroll Tax Expense Employee Benefits Expense Social Security Payable Medicare/Medicaid Payable FUTA Payable SUTA Payable Insurance Payable Retirement Contribution Payable To employer portion of payroll taxes and benefits
1-31-X4
Petty Cash Cash To establish a $1,000 petty cash fund Replenish Petty Cash Fund
1,000 1,000
2-28-X4
Supplies Expense Fuel Expense Miscellaneous Expense Cash To replenish petty cash; receipts on hand of $615 -- office supplies ($390), gasoline ($155), coffee and drinks ($70). Remaining cash in the fund was $385, bringing the total to $1,000 ($615 + $385).
XX-XX-XX Accounts Payable Purchase Returns & Allowances To record the return of defective inventory to vendor
1,000 1,000
Cash Paid outstanding payable within discount period, 2% discount taken ($5,000 X 2% = $100) OR Entry to record payment outside of the discount period: 11-29-X7 Accounts Payable Cash Paid outstanding payable outside of the discount period XX-XX-XX Purchases Accounts Payable Purchased inventory on account 3,000 5,000
4,900
5,000
3,000
11-29-X7
Accounts Payable Purchase Discounts Lost Cash Paid outstanding payable outside of the discount period
XX-XX-XX Rent Expense Prepaid Rent To adjust prepaid rent for portion lapsed ($3,000/2 months = $1,500)
1,500 1,500
Note: A gain instead of a loss would result if the price was less than the carrying amount of the debt.
XX-XX-XX Sales Returns and Allowances Accounts Receivable Customer returned merchandise previously purchased on account
1,000 1,000
Note: This entry would not be appropriate for small stock dividends (under 20 to 25%).
XX-XX-X9 Retained Earnings Common Stock Paid in Capital in Excess of Par To record issuance of a 5% stock dividend (2,300,000 assumed shares outstanding X 5% X $5 per share market price = $575,000; assumes par value is $1 per share)
Note: This entry would not be appropriate for large stock dividends (over 20 to 25%).
Note: If Paid-in Capital had an inadequate balance, Retained Earnings could be debited instead.
XX-XX-X9 Unearned Revenue Revenue Year-end adjusting entry to reflect "earned" portion of software license (9 months at $100 per month)
900 900
8-31-XX
Work in Process Inventory Raw Materials Inventory Materials Quantity Variance To transfer raw materials to production at standard usage rates and related favorable quantity variance
8-31-XX
Work in Process Inventory Labor Efficiency Variance Labor Rate Variance Wages Payable To increase work in process for the standard direct labor costs, and record the related efficiency and rate variances
8-31-XX
Work in Process Inventory Variable Overhead Efficiency Variance Variable OH Spending Variance Factory Overhead To increase work in process for the standard variable overhead, and record the related efficiency and spending variances
8-31-XX
61,200 10,800
Fixed OH Spending Variance Factory Overhead To increase work in process for the standard fixed overhead, and record the related volume and spending variances
2,000 70,000
XX-XX-XX Warranty Expense Warranty Liability To record estimated warranty cost equal to 3% of sales ($1,000,000 X 3%)
30,000 30,000
XX-XX-XX Warranty Liability Cash Repaired defective products under warranty at a cost of $5,000
5,000 5,000