Course Hero Logo

Dec 1 20xx cash paid 1200 400 20xx dec 31 adjustment

Course Hero uses AI to attempt to automatically extract content from documents to surface to you and others so you can study better, e.g., in search results, to enrich docs, and more. This preview shows page 185 - 188 out of 411 pages.

Dec. 1 20XXCash Paid1,20040020XX Dec. 31Adjustment 2(Decreased by $400)Balance afteradjustment800Rent ExpenseDr.Cr.Dec. 31 20XXAdjustment 2 (Increased by$400)400The $400 rent expense appears in the income statement for the month ended December 31 in Year 1. MicroTrain reportsthe remaining $800 of prepaid rent as an asset in the balance sheet on December 31 in Year 1. Thus, this adjusting entryhas accomplished the purpose of recording the expiration of part of the asset, prepaid rent, during the month ofDecember, and the recording of the related rent expense.185
Adjustment 3—Supplies on HandAlmost every business uses supplies in its operations. It may classify supplies simply as supplies (to include all types ofsupplies), or more specifically as office supplies (paper, stationery, pens, pencils), selling supplies (gummed tape, string,paper bags, cartons, wrapping paper), or training supplies (training manuals). Frequently, companies buy supplies in bulk.These supplies, which are purchased in bulk, are recorded as an asset until the company uses them. This asset may becalled supplies, supplies on hand, or supplies inventory.On December 4 in Year 1, MicroTrain Company purchased supplies in bulk for $1,400 and recorded the transaction asfollows:DebitCredit20XXSupplies on Hand1,400Dec. 4Cash1,400To record the purchaseof supplies for futureuse.MicroTrain’s two accounts relating to supplies are Supplies on Hand (an asset) and Supplies Expense. After this entry isposted, the Supplies on Hand account shows a debit balance of $1,400 and the Supplies Expense account has a zerobalance as shown in the following T-Accounts.Supplies on HandDr.Cr.Dec. 4 20XXBalance Cash Paid1,400Supplies ExpenseDr.Cr.Dec. 4 20XXBalance-0-An actual physical count of the supplies on hand at the end of the month of December showed only $900 of supplies onhand. Thus, the company must have used $500 of supplies during the month of December.186
An adjusting journal entry on December 31 brings the two accounts pertaining to supplies to their proper balances. Theadjusting entry recognizes the reduction in the asset (Supplies on Hand) and the recording of an expense (SuppliesExpense) by transferring $500 from the asset to the expense. According to the physical count, the asset balance shouldbe $900 and the expense balance, $500. So MicroTrain makes the following adjusting entry:DebitCreditAdjustment20XXSupplies Expense500Dec.31Supplies on HandTo record rentexpense forDecember5003–SuppliesAfter posting this adjusting entry, the T-accounts appear as follows:Supplies on HandDr.Cr.Dec. 4 20XXCash Paid1,40050020XX Dec. 31Adjustment 3(Decreased by $500)Balance afteradjustment900Supplies ExpenseDr.Cr.Dec. 31 20XXAdjustment 3(Increased by $500)500The entry to record the use of supplies could be made when the supplies are issued from the storeroom. However, suchcareful accounting for small items each time they are issued is usually too costly a procedure.

Upload your study docs or become a

Course Hero member to access this document

Upload your study docs or become a

Course Hero member to access this document

End of preview. Want to read all 411 pages?

Upload your study docs or become a

Course Hero member to access this document

Term
Fall
Professor
N/A

Newly uploaded documents

Show More

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture