[krayzii_]

Hey Guys,

I've tried a few of these questions but I am finding it difficult to come up with the accounts. Eg. I can come up with the first account name, but I find it abit confusing thinking up the second account name. Any tips on how it should be approached? Oh and yes I'm a first year accounting student so its really new to me.

I've got a question or so which I have done but am unsure if its correct. These questions are from my textbook end of chapter exercises.

1. April 06, Jack received payment of $80, 000 for a number of concerts he was to perform later in the year. He recorded these as a liability. By the end of the financial year, (June 30, 2008) $20, 000 of the performances had been completed.

I got and am unsure of;

Dr. Unearned service revenue 20,000
Cr. Service revenue 20,000

2. Supplies purchased are recorded as an asset. An end of period count revealed closing balance of $12,000. There was an opening balance of $15,000 and during the period $11,000 of supplies were purchased.

I think it should be 15,000 + 11,000 = 26,000. Therefore 26,000 - 12,000 = $14,000

Dr. Supplies expense 14000
Cr. Supplies on hand 14000

3. Stephanie received rent on the first day of March, a total of $60,000. Her tenant pays rent in advance for six months commencing on that day and Stephanie records it as revenue. Record the adjusting entry for the year ending July 31.

4. Internet customers who paid their first 12 months of fees in advance would only have to pay $720 and 500 people signed up. At the end of the financial year the provider of the internet service has been providing service for 7 months. Record the adjusting entry for the service provider.

These last two have got me really baffled. If anyone knows how to do this would you please post up an easily understandable method of doing this.

Thanks =D

[CaptainForest]

1) You did it correct.
2) You did it correct.

3)
On March 1, the JE that Stephanie record was
Dr. Cash 60,000
Cr. Unearned Revenue 60,000

So the adjusting entry that she must make, on Jul 31, is to account for 5 months rent (and the 60,000 was to cover 6 months)

So 5/6 of 60,000 is 50,000

Dr. Unearned Revenue 50,000
Cr. Revenue 50,000

(It was a similar problem to problem 1)



4)
The initial JE that was recorded was:
Dr. Cash 360,000
Cr. Unearned Revenue 360,000

Calculation 720 x 500 = 360,000


Therefore, the adjusting entry (to record 7 of 12 months would be)
Dr. Unearned Revenue 210,000
Cr. Revenue 210,000

Calculation 7 / 12 x 360,000 = 210,000

[krayzii_]

Thanks Captain! I was able to do the rest of the next few pages! Except for these three 2 are to do with interest and one is worded strangely!

1. Crowe Investments invested $5,000,000 in a term deposit on January 15, 2007. Interest is paid after one year and interest rates are 8.5% per annum. Record the adjusting entries for Crowe Investmesnts on June 30, 2007

I got a feeling I'm suppose to use interest revenue/expense, but am unsure how to apply it into this question

2. WestBank has accepted investments of $27,000,000 on February 1, 2007. Interest is paid aftter one year and interest rates are 12% per annum. Record the adjusting entries for WestBank on June 30, 2007.

Same as above =\

3. Electricity expense average $4800 per year. The electricity supply company sent us a bill (invoice) in the middle of May and we paid it at the beginning of July. The bill was for supply up to the end of April. Financial year ends on 31/07/02007. Record adjusting entry for electricity.

This one has all these months I'm unsure what to do!

[CaptainForest]

You're welcome and as to your other 3 questions…


1)
Dr. Accounts Receivable/Interest Receivable
Cr. Interest Revenue

The amount?

5,000,000 x .085 x 5.5/12 (because 5.5 months have passed from mid Jan to end June.. if you want to be more specific, you could use total days over 365)

Total = 194,792



2)
Dr. Interest Expense
Cr. Interest Payable

The amount?

27,000,000 x .12 x 5/12 (5 months Fen-June)

Total = 1,350,000



3)

This one has all these months I'm unsure what to do!

This one is confusing, that is for sure.

Let's attempt to break it down.


- Your average electricity expense is 4,800 per year, so that would be 400 per month
- they sent you a bill in may, you paid it in July and your year end is July 31. Therefore no adjustment is needed.
- only electricity to the end of April has been taken care of with the books (from that bill mentioned above).


Therefore, electricity expense for may, June and July must be recorded in the books.


Therefore, the adjusting JE would be:
Dr. Electricity Expense 1,200
Cr. Accounts Payable 1,200


400 per month x 3 months = 1,200

[morgaine300]

From your original post, #3 is incorrect. The problem states she records it as revenue. This is another method that can be used to do deferrals, but most textbooks don't teach this method. Even though this is a deferred revenue like #1, the method is backwards from #1.

This means the original entry was:
Dr. Cash 60,000
Cr. Rent Revenue 60,000

What you have to really look at when you get to the end of the year is what portion needs to be in the revenue and what portion in the unearned account. It's easier to look at it from the point of the view of the unearned account. There have been 5 of the 6 months go by, meaning one month is left that is still applied towards the next fiscal year. That means $10,000 is still unearned as of July 31. So you want $10,000 to be in the unearned account.

So instead of removing 50,000 from unearned, since it wasn't recorded there to begin with, you have to put 10,000 into it, because that's what needs to be there going into the next fiscal year. Since all of it was put into the revenue account, it will have to be removed from there. (Only 50,000 of it should be there.)

Dr. Rent Revenue 10,000
Cr. Unearned Rent 10,000

Even though most books teach to put deferrals into a deferred account (i.e. a prepaid for expenses and an unearned for revenues), in real life it's quite common for these to end up either in the expense account or the revenue account, and then the adjusting entry ends up backwards. It's probably better to put them into the deferred account, but in real life there's a lot of people recording things who don't have any idea how to do it, so the accountants doing year-end stuff have to just work with whatever they have.

[krayzii_]

Thanks Morgaine.

I have a part of a question which is causing me some grief! I'm doing an unadjusted trial balance.

It's got a 6% Government Bonds on the Debit side of 56,000 and I need to do an adjustment for

1. Interest on government bonds is due for the last 5 months.

Would it be right to say

Dr. Interest Revenue Receivable
Cr. Interest Revenue

Amount = 56,000 x 0.06 x 5/12 = 1400.11

/edit or should it be 56,000 x 6 = 280,000

[CaptainForest]

"Stephanie received rent on the first day of March"... "Stephanie records it as revenue"

I can't read... thanks for catching it morgaine

[CaptainForest]

Krayzii,

Your calculation is correct... it should be 1,400

How did you get 1,400.11?

56,000 x 0.06 = 3,360 x 5 / 12 = 1,400

[krayzii_]

Oh I did same as you but I rounded the 5/12 up because I was using the computer calculator!

I'm on the same question >_<

Office supplies expense on the Debit side in my unadjusted trial balance is 5000 and I need to do an adjustment for Office supplies on hand but unused at June 30 amounted to $1000

I've been trying to do the adjustments for this and extract an adjusted trial balance however my Debit sides is not equal to my Credit side so I know I'm doing something incorrect.

Also can I ask if an Income summary is the total from of all the revenues? Because I need to find the sales revenue however the firm in question is John's Seminars and the only revenues are Lecturing fees revenue and consulting revenue and of course Interest revenue.

Thanks again guys. I appreciate it I'm drowning in the work but its proving challenging which is fun.. kind of.. just annoying when you can't figure it out after hours of work!

[CaptainForest]

Office supplies expense on the Debit side in my unadjusted trial balance is 5000 and I need to do an adjustment for Office supplies on hand but unused at June 30 amounted to $1000

What?

Are you saying that you have Office Supplies Expense of 5,000 and never debited Office Supplies?

IF that is the case..
Dr. Office Supplies 1,000
Cr. Office Supplies Expense 1,000

Also can I ask if an Income summary is the total from of all the revenues? Because I need to find the sales revenue however the firm in question is John's Seminars and the only revenues are Lecturing fees revenue and consulting revenue and of course Interest revenue.

Income Summary (which is in truth just an account to assist students in the learning process)….

But, ALL revenue and expenses are either credited or debited to Income Summary

So Lecturing fees is a sales account (with a credit balance). You would debt that account to close it, and therefore credit Income Summary as well.