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Allowance for Uncollectible Accounts Illustrative Entries

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

Asset Sales Illustrative Entry


06-30-X3 Accumulated Depreciation Loss Cash Equipment Sold equipment costing $100,000 for $10,000. The equipment was 75% depreciated on the date of sale. 75,000 15,000 10,000 100,000

Note: A Gain would be recorded if the sales proceeds exceeded the net book value of the asset sold.

Bonds Payable Issued Between Interest Dates Illustrative Entries


6-1-X1 Cash Interest Payable Bonds Payable To record issuance of 100, 12% bonds Interest Expense Interest Payable Cash To record interest payment (includes return of accrued interest payable from original issue on June 1) 102,000 2,000 100,000 4,000 2,000 6,000

9-30-X1

Bonds Payable at Discount Illustrative Entries


1-1-X1 Cash Discount on Bonds Payable Bonds Payable To record issuance of 100, 8%, 5-year bonds at discount periodically Interest Expense Discount on Bonds Payable Cash To record interest payment (this entry occurs on every interest payment date at 6 month intervals) and amortization of discount 12-31-X5 Bonds Payable Cash To record payment of face value at maturity 100,000 100,000 4,772 772 4,000 92,278 7,722 100,000

Bonds Payable at Par Illustrative Entries


1-1-X1 Cash Bonds Payable To record issuance of 100, 8%, 5-year bonds at par (100 X $1,000 each) periodically Interest Expense Cash To record interest payment (this entry occurs on every interest payment date at 6 month intervals -- $100,000 X 8% X 6/12) 12-31-X5 Bonds Payable Cash To record payment of face value at maturity 100,000 100,000 4,000 4,000 100,000 100,000

Cash Dividend Illustrative Entries


XX-XX-X9 Dividends Dividends Payable To record declaration of cash dividends 1,500,000 1,500,000

XX-XX-X9 Dividends Payable Cash To record payment of cash dividends

1,500,000 1,500,000

Closing Revenue, Expense, and Dividends Illustrative Entries


12-31-X9 Revenues Income Summary To close the revenue account to Income Summary 12-31-X9 Income Summary Salaries Expense Advertising Expense Fuel Expense Depreciation Expense Interest Expense To close the expense accounts to Income Summary 12-31-X9 Income Summary Retained Earnings To close Income Summary to retained earnings (note that the balance is equal to the net income resulting from netting all revenues and expenses) 12-31-X9 Retained Earnings Dividends To close dividends 1,000 1,000 2,600 2,600 30,200 17,000 5,000 2,000 5,000 1,200 32,800 32,800

Collection of Accounts Receivable Illustrative Entry


XX-XX-X9 Cash 4,000

Accounts Receivable Collected outstanding account receivable

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

Foreign Currency Exchange Gains and Losses Illustrative Entries


12-1-X1 Accounts Receivable Sales Sold goods to a customer in England, agreeing to accept 100,000 British pounds (100,000 pounds X $1.75 spot rate = $175,000) 175,000 175,000

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)

170,000 20,000 190,000

Depreciation Illustrative Entry


XX-XX-XX Depreciation Expense Accumulated Depreciation To record annual depreciation expense 50,000 50,000

Dividend Income Illustrative Entry


9-15-X5 Cash Dividend Income To record receipt of dividend on trading security investment 75 75

Typical accrued expense Illustrative Entry


XX-XX-X9 Salaries Expense Salaries Payable Incurred advertising expense on account 2,000 2,000

Typical expense paid with cash Illustrative Entry


XX-XX-X9 Advertising Expense Cash Paid advertising expense with cash 2,000 2,000

Typical expense incurred on account Illustrative Entry


XX-XX-X9 Advertising Expense Accounts Payable Incurred advertising expense on account 2,000 2,000

Freight-out and Freight-in Illustrative Entry

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

Available for Sale Securities Illustrative Entries


3-3-X6 Available for Sale Securities Cash To record the purchase of 5,000 shares of Merriam stock at $10 per share 50,000 50,000

3-31-X6

Unrealized Gain/Loss - OCI Available for Sale Securities

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

Investment in Bonds at Discount Illustrative Entries


1-1-X3 Investment in Bonds Cash To record the purchase of five $1,000, 5%, 3-year bonds at 97 -- interest payable semiannually 4,850 4,850

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

Investment in Bonds Payable at Par Illustrative Entries


1-1-X3 Investment in Bonds Cash To record the purchase of five $1,000, 5%, 3-year bonds at par -- interest payable semiannually 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

Investment in Bonds at Premium Illustrative Entries


1-1-X3 Investment in Bonds Cash To record the purchase of five $1,000, 5%, 3-year bonds at 106 -- interest payable semiannually 5,300 5,300

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

Available for Equity Method Investments Illustrative Entries


4-1-X3 Investment Cash To record the purchase of 5,000 shares of Legg stock at $10 per share. Legg has 20,000 shares outstanding, and the investment in 25% of Legg (5,000/20,000 = 25%) is sufficient to give the investor significant influence 50,000 50,000

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

Cash Investment To record the receipt of $1,000 in

1,000 1,000

dividends from Legg -- Legg declared and paid a total of $4,000 ($4,000 X 25% = $1,000)

Trading Securities Illustrative Entries


3-3-X6 Trading Securities Cash To record the purchase of 5,000 shares of Merriam stock at $10 per share 50,000 50,000

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

Issuance of No-par Stock Illustrative Entry


XX-XX-X9 Cash Common Stock To record issuance of 3,000,000 shares of no-par common stock at $5 per share 15,000,000 15,000,000

Note: The credit could have been to "capital stock"

Issuance of Par Value Stock Illustrative Entry


XX-XX-X9 Cash Common Stock Paid in Capital in Excess of Par To record issuance of 3,000,000 shares of $1 par value common stock at $5 per share 15,000,000 3,000,000 12,000,000

Issuance of Par Value Stock Illustrative Entry


XX-XX-X9 Cash Common Stock Paid in Capital in Excess of Par To record issuance of 3,000,000 shares of $1 par value common stock at $5 per share 15,000,000 3,000,000 12,000,000

Issuance of Preferred Stock Illustrative Entry


XX-XX-X9 Cash Preferred Stock Paid in Capital in Excess -- PS To record issuance of 100,000 shares of $100 par value preferred stock at 110 11,000,000 10,000,000 1,000,000

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

To Record Actual Overhead


6-30-X3 Factory Overhead Salaries Payable Supplies Prepaid Insurance 100,000 50,000 15,000 5,000

Accumulated Depreciation Taxes Payable Utilities Payable To record various factory overhead costs

11,000 9,000 10,000

To Record Overapplied Overhead


6-30-X3 Factory Overhead Cost of Goods Sold To reduce cost of goods sold for the overapplied overhead 10,000 10,000

To Record Underapplied Overhead


6-30-X3 Cost of Goods Sold Factory Overhead To transfer underapplied overhead to cost of goods sold 10,000 10,000

Loan Payable, Interest Accrual, and Repayment Illustrative Entries


7-1-X1 Cash Loan Payable To record the borrowing of $100,000 at 6% per annum; principal and interest due on 12-31-X2 12-31-X1 Interest Expense Interest Payable To record accrued interest for 6 months ($100,000 X 6% X 6/12) 12-31-X2 Interest Expense 6,000 3,000 3,000 100,000 100,000

Interest Payable Loan Payable Cash To record repayment of loan and interest (note that $3,000 of the total interest was previously accrued)

3,000 100,000 109,000

Note: The Notes Payable account could have been substituted for Loan Payable

Notes Payable Issued at Discount Illustrative Entries


1-1-X8 Cash Discount on Note Payable Note Payable To record note payable, issued at a discount 9,000 10,000 10,000

12-31-X8 Interest Expense Discount on Note Payable To record discount amortization Note Payable Cash To record repayment of note

1,000 1,000 10,000 10,000

Notes Receivable Illustrative Entries

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:

10,300 300 10,000

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)

10,300 300 10,000

Paying Accounts Payable Illustrative Entry


XX-XX-X9 Accounts Payable Cash Paid outstanding accounts payable 2,000 2,000

Payroll Illustrative Entries


7-31-XX Salaries Expense Federal Income Tax Payable State Income Tax Payable Social Security Payable Medicare/Medicaid Payable Insurance Payable Retirement Contribution Payable Charitable Contribution Payable Health/Child Flex Payable Cash To record payroll of Fictitious 3,000 349 117 180 45 175 200 25 75 1,834

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

225 675 180 45 0 0 475 200

Petty Cash Illustrative Entry


Establish Petty Cash Fund

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).

390 155 70 615

Perpetual Inventory Illustrative Entry


Entry to record purchase of inventory: 12-12-X1 Inventory Accounts Payable Purchased $3,000 of inventory on account Entries to record sale of inventory: 12-21-X1/ Accounts Receivable Sales Sold merchandise on account 12-21-X1 Cost of Goods Sold Inventory To record the cost of merchandise sold 3,000 3,000 5,000 5,000 3,000 3,000

Purchases and Purchases Returns Illustrative Entry


XX-XX-XX Purchases Accounts Payable Purchased inventory on account 3,000 3,000

XX-XX-XX Accounts Payable Purchase Returns & Allowances To record the return of defective inventory to vendor

1,000 1,000

Purchases with Discount (gross) Illustrative Entry


Entry to record initial purchase (gross): 11-5-X7 Purchases Accounts Payable Purchased inventory on account, terms 2/10,n/30 Entry to record payment within the discount period: 11-13-X7 Accounts Payable Purchase Discounts 5,000 100 5,000 5,000

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

Purchases with Discount (net) Illustrative Entry


Entry to record initial purchase (net): 11-5-X7 Purchases Accounts Payable Purchased $5,000 of inventory on account, terms 2/10,n/30 ($5,0000 - ($5,000 X 2%) = $4,900) Entry to record payment within the discount period: 11-13-X7 Accounts Payable Cash Paid outstanding payable within discount period, OR Entry to record payment outside of the discount period: 4,900 4,900 4,900 4,900

11-29-X7

Accounts Payable Purchase Discounts Lost Cash Paid outstanding payable outside of the discount period

4,900 100 5,000

Prepaids Illustrative Entries


XX-XX-X9 Prepaid Rent Cash Prepaid a two-month lease 3,000 3,000

XX-XX-XX Rent Expense Prepaid Rent To adjust prepaid rent for portion lapsed ($3,000/2 months = $1,500)

1,500 1,500

Retirement of Debt Illustrative Entries


6-30-X5 Bonds Payable Loss on Bond Retirement Discount on Bonds Payable Cash To record retirement of debt (loss = $210,000 - ($200,000 - $5,800) = $15,800) 200,000 15,800 5,800 210,000

Note: A gain instead of a loss would result if the price was less than the carrying amount of the debt.

Accrued Revenue Illustrative Entry


12-31-X( Accounts Receivable Revenue Year-end adjusting entry to reflect "earned" revenues for services provided in December 500 500

Cash Revenue Illustrative Entry


XX-XX-X9 Cash Service Revenue Provided services to customers for cash 4,000 4,000

Revenue on Account Illustrative Entry


XX-XX-X9 Accounts Receivable Service Revenue Provide service to customer on account 4,000 4,000

Sales and Sales Returns Illustrative Entry


XX-XX-XX Accounts Receivable Sales Sold merchandise on account 4,000 4,000

XX-XX-XX Sales Returns and Allowances Accounts Receivable Customer returned merchandise previously purchased on account

1,000 1,000

Large Stock Dividend Illustrative Entry


XX-XX-X9 Retained Earnings Common Stock To record issuance of a 50% stock dividend (1,000,000 assumed shares outstanding X 50% X $1 per share par) 500,000 500,000

Note: This entry would not be appropriate for small stock dividends (under 20 to 25%).

Small Stock Dividend Illustrative Entry

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)

575,000 115,000 460,000

Note: This entry would not be appropriate for large stock dividends (over 20 to 25%).

Treasury Stock Purchase Illustrative Entry


XX-XX-X9 Treasury Stock Cash To record acquisition of treasury shares 2,000,000 2,000,000

Treasury Stock Reissue Above Cost Illustrative Entry


XX-XX-XX Cash Treasury Stock Paid in Capital in Excess of Par To record reissue of 10,000 treasury shares at $40 per share 400,000 250,000 150,000

Treasury Stock Reissue Below Cost Illustrative Entry


XX-XX-XX Cash Paid in Capital in Excess of Par Treasury Stock To record reissue of 10,000 treasury shares at $20 per share 200,000 50,000 250,000

Note: If Paid-in Capital had an inadequate balance, Retained Earnings could be debited instead.

Unearned Revenues Illustrative Entries


XX-XX-X9 Cash Unearned Revenue Sold a one-year software license for $1,200 1,200 1,200

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

Variances Illustrative Entries


8-31-XX Raw Materials Inventory Materials Price Variance Accounts Payable To record purchase of raw materials at standard price and related unfavorable variance 328,000 41,000 369,000

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

340,000 328,000 12,000

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

183,600 41,400 50,000 175,000

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

102,000 23,000 20,000 105,000

8-31-XX

Work in Process Inventory Fixed Overhead Volume Variance

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

Warranties Illustrative Entries


XX-XX-XX Cash Sales To record sales 1,000,000 1,000,000

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