9. SUPPLIES TB During June, Jessie purchased supplies for $80. These were debited to the supplies account. SUPPLIES 80 PURCHASED IN JUNE
10. SUPPLIES During June, Jessie purchased supplies for $80. These were debited to the supplies account. SUPPLIES 80 Bal. 80 According to an inventory of supplies, there are only $20 of supplies on hand at the end of June. TB
11. SUPPLIES During June, Jessie purchased supplies for $80. These were debited to the supplies account. SUPPLIES 80 Bal. 80 But unless there is an adjusting entry made, $80 of supplies will be shown on the balance sheet. TB
12. SUPPLIES During June, Jessie purchased supplies for $80. These were debited to the supplies account. SUPPLIES 80 Bal. 80 ADJUSTING ENTRY NEEDED!!!! TB
13. SUPPLIES SUPPLIES 80 Bal. 80 TB $80 Purchased during month – 20 Supplies remaining $60 Supplies used
14. SUPPLIES SUPPLIES 80 Bal. 80 $60 is credited to Supplies to remove the amount of supplies used during June. 60 TB Adj.
15. SUPPLIES SUPPLIES 80 Bal. 80 $60 is debited to Supplies Expense to recognize the amount of supplies used during June. 60 SUPPLIES EXPENSE 60 TB Adj. Adj.
16. SUPPLIES SUPPLIES 80 Bal. 80 60 SUPPLIES EXPENSE 60 TB Adj. Adj. Now the balance sheet will show $20 of supplies! 20 Bal.
17. SUPPLIES SUPPLIES 80 Bal. 80 60 SUPPLIES EXPENSE 60 TB Adj. Adj. 20 Bal. The income statement will show $60 of supplies used during June. Bal. 60
18. PREPAID INSURANCE TB During June, Jessie paid $200 for an eight-month liability insurance policy with coverage beginning on June 1. PREPAID INSURANCE 200 8-month policy June 1 – Jan. 31
19. PREPAID INSURANCE TB During June, Jessie paid $200 for an eight-month liability insurance policy with coverage beginning on June 1. PREPAID INSURANCE 200 Now that June is over, we need to remove the cost of one month’s insurance from this account.
21. PREPAID INSURANCE PREPAID INSURANCE 200 Prepaid Insurance is credited for $25 to remove June’s insurance coverage that has expired. 25 TB Adj.
22. PREPAID INSURANCE PREPAID INSURANCE 200 25 INSURANCE EXPENSE 25 Insurance Expense is debited for $25 to recognize the amount of insurance coverage for June. TB Adj. Adj.
23. PREPAID INSURANCE PREPAID INSURANCE 200 25 INSURANCE EXPENSE 25 TB Adj. Adj. The balance sheet will show $175 (7 months) of prepaid insurance! Bal. 175
24. PREPAID INSURANCE PREPAID INSURANCE 200 25 INSURANCE EXPENSE 25 TB Adj. Adj. Bal. 175 The income statement will show $25 (1 month) of insurance consumed! Bal. 25
25. WAGES EXPENSE Jessie paid her part-time employees $650 on June 27. Since then, they have earned an additional $50, but have not yet been paid. WAGES EXPENSE 650 650 Bal. $650 does not include all of the wages earned by employees during June. TB
26. WAGES EXPENSE Jessie paid her part-time employees $650 on June 27. Since then, they have earned an additional $50, but have not yet been paid. WAGES EXPENSE 650 650 Bal. An ADJUSTING ENTRY is needed! TB
27. WAGES EXPENSE WAGES EXPENSE 650 $50 debit to Wages Expense for the additional wages earned during June. 50 TB Adj.
28. WAGES EXPENSE WAGES EXPENSE 650 Jessie Jane owes the employees for the additional wages. This liability is recorded in the wages payable account. 50 WAGES PAYABLE 50 Adj. TB Adj.
29. WAGES EXPENSE WAGES EXPENSE 650 50 WAGES PAYABLE 50 Adj. TB Adj. The income statement will show ALL wages earned by employees in June! Bal. 700
30. WAGES EXPENSE WAGES EXPENSE 650 50 WAGES PAYABLE 50 Adj. TB Adj. Bal. 700 The balance sheet will show the liability for wages earned in June that will be paid in July. Bal. 50
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35. STRAIGHT-LINE DEPRECIATION EXAMPLE Jessie has motor scooters with an estimated useful live of 3 years, no salvage value, and an original cost of $3,600. Because Jessie expects the scooters to be of no value when the three years are over, the whole $3,600 cost needs to be spread over the next three years.
36. STRAIGHT-LINE DEPRECIATION EXAMPLE FORMULA: 1st step: Calculate the depreciable cost. Original Cost Salvage Value = Depreciable Cost $3,600 $0 = $3,600 – –
37. STRAIGHT-LINE DEPRECIATION EXAMPLE 2nd step: Determine depreciation expense for this accounting period. FORMULA: Depreciable Cost Estimated Useful Life $3,600 Since we are trying to compute depreciation for one month, we will use months instead of years. =
38. STRAIGHT-LINE DEPRECIATION EXAMPLE 2nd step: Determine depreciation expense for this accounting period. FORMULA: Depreciable Cost Estimated Useful Life $3,600 36 months =
39. STRAIGHT-LINE DEPRECIATION EXAMPLE 2nd step: Determine depreciation expense for this accounting period. FORMULA: Depreciable Cost Estimated Useful Life $3,600 36 months = = $100 per month
40. DEPRECIATION EXPENSE Now that we know depreciation for June is $100, let’s figure out the adjusting entry.
41. DEPRECIATION DELIVERY EQUIPMENT 3,600 We do NOT adjust this account. It should always reflect the ORIGINAL COST of the asset. TB
42. ACCUMULATED DEPRECIATION DELIVERY EQUIPMENT 3,600 Depreciation is credited to this account instead of the asset account. ACCUMULATED DEPRECIATION — DELIVERY EQUIPMENT 100 TB Adj.
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45. DEPRECIATION EXPENSE DELIVERY EQUIPMENT 3,600 ACCUMULATED DEPRECIATION — DEL. EQUIP. 100 DEPRECIATION EXPENSE — DEL. EQUIP. 100