Present, in journal form, the adjustments that would be made on July 31, 2011, the end of the fiscal year, for each of the following.
1. The supplies inventory on August 1, 2010 was $7,350. Supplies costing $20,150 were acquired during the year and charged to the supplies inventory. A count on July 31, 2011 indicated supplies on hand of $8,810.
2. On April 30, a ten-month, 9% note for $20,000 was received from a customer.
*3. On March 1, $12,000 was collected as rent for one year and a nominal account was credited.
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Solution 3-125 1. Supplies Expense ........................................................................ 18,690 Supplies ............................................................................. 18,690 2. Interest Receivable ...................................................................... 450 Interest Revenue ............................................................... 450 *3. Rent Revenue .............................................................................. 7,000 Unearned Revenue ........................................................... 7,000
Journal Entry: July 31, 2011
1. Adjustment for supplies:
- The supplies inventory on August 1, 2010, was $7,350.
- Supplies costing $20,150 were acquired during the year.
- A count on July 31, 2011, indicated supplies on hand of $8,810.
To adjust the supplies inventory, we need to calculate the ending inventory of supplies and the cost of supplies used during the year.
Calculation:
Supplies on hand on July 31, 2011: $8,810
Supplies acquired during the year: $20,150
Cost of supplies used during the year: $20,150 - $8,810 = $11,340
Journal entry:
Supplies Expense $11,340
Supplies Inventory $11,340
2. Adjustment for notes receivable:
- On April 30, a ten-month, 9% note for $20,000 was received from a customer.
To adjust the notes receivable, we need to record the interest earned on the note for the period from April 30 to July 31, 2011.
Calculation:
Principal amount of the note: $20,000
Interest rate: 9%
Time period: 3 months (from April 30 to July 31)
Interest earned: $20,000 * 9% * (3/12) = $450
Journal entry:
Interest Receivable $450
Interest Revenue $450
3. Adjustment for collected rent:
- On March 1, $12,000 was collected as rent for one year, and a nominal account was credited.
To adjust for the collected rent, we need to record the revenue for the remaining months from March 1 to July 31, 2011.
Calculation:
Rent collected for one year: $12,000
Time period: 5 months (from March 1 to July 31)
Rent revenue for the remaining months: $12,000 * (5/12) = $5,000
Journal entry:
Rent Revenue $5,000
Unearned Rent $5,000
Please note that the descriptions and general ledger account names may vary in different accounting systems, but the nature of the adjustments remains the same. These journal entries ensure that the financial statements accurately reflect the company's financial position and performance at the end of the fiscal year.