3.

03 Key Terms

Term Definition

The length of time for which a business summarizes and

Fiscal period reports financial information

A columnar accounting form used to summarize the general

Worksheet ledger information needed to prepare financial statements

A proof of the equality of debits and credits in a general ledger

Trial balance

Journal entries recorded to update general ledger accounts at

the end of the fiscal period
Adjusting entries

Journal entries used to prepare temporary accounts for a new

fiscal period
Closing entries

A trial balance that is prepared after the closing entries are

posted to verify equality of debits and credits when preparing
Post-closing trial balance for the next fiscal period

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3.03 Journalize Adjusting Entries – Page 1

Adjustment Information, December 31

Uncollectible accounts expense – estimated as 1.0% of total sales on account

Total Sales on Account for the year $400,500

Merchandise Inventory – Audio (ending balance) 255,000

Merchandise Inventory – Video (ending balance) 200,000

Supplies Used - Administrative 5,550

Supplies Used – Audio 4,500

Supplies Used - Video 3,000

Value of Prepaid Insurance 3,750

Depreciation Expense – Office Equipment 2,225

Depreciation Expense – Store Equipment, Audio 1,550

Depreciation Expense – Store Equipment, Video 1.200

Federal Income Tax Expense for the year 12,500

Uncollectible Accounts Expense Adjustment

Totals Sales on Account x Percentage = Estimated Uncollectible Accounts Expense

1. _______________ Uncollectible Accounts Expense

2. _______________ Allowance for Uncollectible Accounts

Uncollectible Accounts Allowance for

Expense Uncollectible Accounts

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Merchandise Inventory Adjustment

December 31 Inventory – Audio $220,000
December 31 Inventory – Video $175,000

Ending Inventory – Beginning Inventory = Amount of Adjustment

1. ______________ Merchandise Inventory – Audio

2. ______________ Income Summary – Audio

3. ______________ Merchandise Inventory – Video

4. ______________ Income Summary – Video

Merchandise Inventory-
Audio Income Summary - Audio

Merchandise Inventory-
Video Income Summary - Video

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Supplies Adjustment
1. ______________ Supplies Expense – Administrative

2. ______________ Supplies Expense – Audio

3. ______________Supplies Expense – Video

4. ______________Supplies – Administrative

5. ______________ Supplies – Audio

6. ______________ Supplies – Video

Supplies Expense –
Administrative Supplies - Administrative

Supplies Expense – Audio Supplies - Audio

Supplies Expense – Video Supplies - Video

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Prepaid Insurance Adjustment

December 31 Balance $9,550

Beginning Balance – Unexpired Insurance = Amount Used or Adjustment Amount

1. ______________ Insurance Expense

2. ______________ Prepaid Insurance

Insurance Expense Prepaid Insurance

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Depreciation Expense Adjustment

1. ______________ Depreciation Expense – Office Equipment

2. ______________ Depreciation Expense, Store Equipment – Audio

3. ______________ Depreciation Expense, Store Equipment – Video

4. ______________ Accumulated Depreciation – Office Equipment

5. ______________ Accumulated Depreciation, Store Equipment – Audio

6. ______________ Accumulated Depreciation, Store Equipment – Video

Depreciation Expense – Accumulated Depreciation –

Office Equipment Office Equipment

Depreciation Expense, Accumulated Depreciation –

Store Equipment – Audio Store Equipment - Audio

Depreciation Expense, Accumulated Depreciation –

Store Equipment – Video Store Equipment - Video

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Federal Income Tax Expense Adjustment

Estimated Federal Income Tax at the beginning of the year $10,500

1. ______________ Federal Income Tax Expense

2. ______________ Federal Income Tax Payable

Federal Income Federal Income

Tax Expense Tax Payable

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3.03 Journalize Adjusting Entries – Page 1
Adjustment Information, December 31
Uncollectible accounts expense – estimated as 1.0% of total sales on account

Total Sales on Account for year $400,500

Merchandise Inventory – Audio (ending balance) 255,000

Merchandise Inventory – Video (ending balance) 200,000

Supplies Used - Administrative 5,550

Supplies Used – Audio 4,500

Supplies Used - Video 3,000

Value of Prepaid Insurance 3,750

Depreciation Expense – Office Equipment 2,225

Depreciation Expense – Store Equipment, Audio 1,550

Depreciation Expense – Store Equipment, Video 1.200

Federal Income Tax Expense for Year 12,500

Uncollectible Accounts Expense Adjustment

Totals Sales on Account x Percentage = Estimated Uncollectible Accounts Expense

1. Debit Uncollectible Accounts Expense

2. Credit Allowance for Uncollectible Accounts

Uncollectible Accounts Allowance for

Expense Uncollectible Accounts

$4,005 $4,005

3.03 Journalize Adjusting Entries – Page 2

6312 Accounting II Summer 2011 Version 2 Page 8

Merchandise Inventory Adjustment
December 31 Inventory – Audio $220,000
December 31 Inventory – Video $175,000

Ending Inventory – Beginning Inventory = Amount of Adjustment

1. Debit Merchandise Inventory – Audio

2. Credit Income Summary – Audio

3. Debit Merchandise Inventory – Video

4. Credit Income Summary – Video

Merchandise Inventory –
Audio Income Summary - Audio

$35,000 $35,000

Merchandise Inventory –
Video Income Summary - Video

$25,000 $25,000

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Supplies Adjustment
1. Debit Supplies Expense – Administrative

2. Debit Supplies Expense – Audio

3. Debit Supplies Expense – Video

4. Credit Supplies – Administrative

5. Credit Supplies – Audio

6. Credit Supplies – Video

Supplies Expense –
Administrative Supplies - Administrative

$5,550 $5,550

Supplies Expense – Audio Supplies - Audio

$4,500 $4,500

Supplies Expense – Video Supplies – Video

$3,000 $3,000

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Prepaid Insurance Adjustment

December 31 Balance $9,550

Beginning Balance – Unexpired Insurance = Amount Used or Adjustment Amount

1. Debit Insurance Expense

2. Credit Prepaid Insurance

Insurance Expense Prepaid Insurance

$5,800 $5,800

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Depreciation Expense Adjustment

1. Debit Depreciation Expense – Office Equipment

2. Debit Depreciation Expense, Store Equipment – Audio

3. Debit Depreciation Expense, Store Equipment – Video

4. Credit Accumulated Depreciation – Office Equipment

5. Credit Accumulated Depreciation, Store Equipment – Audio

6. Credit Accumulated Depreciation, Store Equipment – Video

Depreciation Expense – Accumulated Depreciation –

Office Equipment Office Equipment

$2,225 $2,225

Depreciation Expense, Accumulated Depreciation –

Store Equipment – Audio Store Equipment - Audio

$1,550 $1,550

Depreciation Expense, Accumulated Depreciation –

Store Equipment – Video Store Equipment - Video

$1,220 $1,220

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3.03 Journalize Adjusting Entries – Page 6

Federal Income Tax Expense Adjustment

Estimated Federal Income Tax at the beginning of the year $10,500

1. Debit Federal Income Tax Expense

2. Credit Federal Income Tax Payable

Federal Income Federal Income

Tax Expense Tax Payable

$2,000 $2,000

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3.03 Journalize Closing Entries

1. Record Closing Entries for income statement accounts with __________ balances.

(_________ and __________ _________ Accounts)

2. Record Closing Entries for income statement accounts with _________ balances.

(_________, Contra __________ and __________ Accounts)

3. Record Closing Entries for net income or net loss in the _________ _________

account and __________ income summary.

4. Record Closing Entry for the __________ account.

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3.03 Journalize Closing Entries

1. Record Closing Entries for income statement accounts with credit balances.
(Revenue and Contra Cost Accounts)

2. Record Closing Entries for income statement accounts with debit balances.
(Cost, Contra Revenue and Expense Accounts)

3. Record Closing Entries for net income or net loss in the retained earnings account
and close income summary.

4. Record Closing Entry for the dividends account.

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3.03 Post Closing Trial Balance

After __________ and __________ entries are posted, the equality of __________ and

__________ needs to be proved again. This procedure shows that the equality of

debits and credits has been maintained in preparation for the new fiscal period. A

_________-_________ Trial Balance is prepared after the closing entries are posted.

The balances in the __________ accounts are listed on the post-closing trial balance.

The total of the debit balances should ___________ the total of the credit balances.

Steps to Prepare a Post-Closing Trial Balance

1. List the __________ account titles.

2. Enter the __________ balances in the __________ column.

3. Enter the __________ balance in the __________ column.

4. Total the _________ column and the _________ column and verify that debits

_________ credits.

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3.03 Post Closing Trial Balance

After adjusting and closing entries are posted, the equality of debits and credits

needs to be proved again. This procedure shows that the equality of debits and credits

has been maintained in preparation for the new fiscal period. A Post-Closing Trial

Balance is prepared after the closing entries are posted. The balances in the

permanent accounts are listed on the post-closing trial balance. The total of the debit

balances should equal the total of the credit balances.

Steps to Prepare a Post-Closing Trial Balance

1. List the permanent account titles.

2. Enter the debit balances in the debit column.

3. Enter the credit balances in the credit column.

4. Total the debit column and the credit column and verify that debits equal

credits.

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3.03 Prototype Assessment Items – Page 1

These prototype assessment items illustrate the types of items used in the item bank for
this objective. All items have been written to match the cognitive process of the apply
verb in the objective. These exact questions will not be used on the secure
postassessment, but questions in similar formats will be used.

Journalize Adjusting Entries

Figure 3.03-A

Adjustment Information, December 31

Uncollectible accounts expense – estimated as 1.0% of total sales
on account

Total Sales on Account for Year $410,750

Merchandise Inventory – Audio (ending balance) 210,000

Merchandise Inventory – Video (ending balance) 150,000

Supplies Used – Administrative 2,500

Supplies Used – Audio 6,000

Supplies Used – Video 3,500

Value of Prepaid Insurance 3,000

Depreciation Expense – Office Equipment 2,000

Depreciation Expense – Store Equipment, Audio 6,000

Depreciation Expense – Store Equipment, Video 2,700

Federal Income Tax Expense for Year 9,740

6312 Accounting II Summer 2011 Version 2 Page 18