journal entries

Allowance for Uncollectible Accounts

Illustrative Entries

Establish Allowance:

12-31-X5 Uncollectible Accounts Expense 75,000

Allow. for Uncollectible Accounts 75,000

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 1,000

Accounts Receivable 1,000

To write-off of an uncollectible account

Asset Sales

Illustrative Entry

06-30-X3 Accumulated Depreciation 75,000

Loss 15,000

Cash 10,000

Equipment

100,000

Sold equipment costing $100,000 for $10,000. The equipment was 75% depreciated on the date of sale.

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


6-1-X1 Cash 102,000

Interest Payable 2,000

Bonds Payable 100,000

To record issuance of 100, 12% bonds

9-30-X1 Interest Expense 4,000


Cash 6,000

To record interest payment (includes return of accrued interest payable from original issue on June 1)

Bonds Payable at Discount


1-1-X1 Cash 92,278

Discount on Bonds Payable 7,722


To record issuance of 100, 8%, 5-year bonds at discount

periodically Interest Expense 4,772

Discount on Bonds Payable

772

Cash 4,000

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

100,000

Cash

100,000

To record payment of face value at maturity

Bonds Payable at Par


1-1-X1 Cash 100,000


To record issuance of 100, 8%, 5-year bonds at par (100 X $1,000 each)

periodically Interest Expense 4,000

Cash 4,000

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 100,000

Cash

100,000

To record payment of face value at maturity

Cash Dividend

Illustrative Entries XX-XX-X9 Dividends 1,500,000

Dividends Payable 1,500,000

To record declaration of cash dividends

XX-XX-X9 Dividends Payable 1,500,000

Cash 1,500,000

To record payment of cash dividends

Closing Revenue, Expense, and

Dividends


12-31-X9 Revenues 32,800

Income Summary 32,800

To close the revenue account to Income Summary

12-31-X9 Income Summary 30,200

Salaries Expense

17,000

Advertising Expense 5,000

Fuel Expense 2,000

Depreciation Expense 5,000

Interest Expense 1,200

To close the expense accounts to Income Summary

12-31-X9 Income Summary 2,600

Retained Earnings 2,600

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 1,000

Dividends 1,000

To close dividends

Collection of Accounts Receivable

Illustrative Entry

XX-XX-X9 Cash 4,000


Collected outstanding account receivable

Compound Entry to Buy Asset for Cash

and Note

Illustrative Entry

XX-XX-X9 Land 15,000

Cash

5000

Note Payable 10,000

Purchased land by giving $5,000 cash, and promising to pay the remainder in 90 days

Foreign Currency Exchange Gains and

Losses

Illustrative Entries 12-1-X1 Accounts Receivable 175,000

Sales 175,000

Sold goods to a customer in England, agreeing to accept 100,000 British pounds (100,000 pounds X $1.75 spot rate = $175,000)

12-31-X1 Accounts Receivable 15,000

Currency Exchange Gain 15,000

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)

2-28-X2 Cash 170,000

Currency Exchange Loss 20,000


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)

Depreciation

Illustrative Entry

XX-XX-XX Depreciation Expense 50,000

Accumulated Depreciation 50,000

To record annual depreciation expense

Dividend Income

Illustrative Entry

9-15-X5 Cash 75

Dividend Income 75

To record receipt of dividend on trading security investment

Typical accrued expense

Illustrative Entry XX-XX-X9 Salaries Expense 2,000

Salaries Payable 2,000

Incurred advertising expense on account

Typical expense paid with cash

Illustrative Entry XX-XX-X9 Advertising Expense

2,000

Cash 2,000

Paid advertising expense with cash

Typical expense incurred on account

Illustrative Entry XX-XX-X9 Advertising Expense 2,000

Accounts Payable 2,000

Incurred advertising expense on account

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 8,000

Freight-in 1,500

Cash 1,500


Purchased $8,000 of inventory, terms F.O.B. shipping point, and paid the shipping freight bill of $1,500

• 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.


Freight-out 400

Cash 400

Sales 7,000

Sold merchandise on account for $7,000, terms F.O.B. destination, and paid the freight bill of $400

Available for Sale Securities


3-3-X6 Available for Sale Securities 50,000

Cash

50,000

To record the purchase of 5,000 shares of Merriam stock at $10 per share

3-31-X6 Unrealized Gain/Loss - OCI 5,000

Available for Sale Securities 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 15,000

Unrealized Gain/Loss - OCI 50,000

To record a $3 per share increase in the value of 5,000 shares of Merriam stock

Investment in Bonds at Discount


1-1-X3 Investment in Bonds 4,850

Cash 4,850

To record the purchase of five $1,000, 5%, 3-year bonds at 97 -- interest payable semiannually

6-30-X3 Cash

125

Investment in Bonds 25

Interest Income 150

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)

12-31-X5 Cash 5,000

Investment in Bonds 5,000

To record the redemption of bond investment at maturity.

Investment in Bonds Payable at Par


1-1-X3 Investment in Bonds

5,000

Cash 5,000

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

6-30-X3 Cash 125

Interest Income 125

To record the receipt of an interest payment ($5,000 par X .05 interest X 6/12 months)

12-31-X5 Cash 5,000



Investment in Bonds at Premium


1-1-X3 Investment in Bonds 5,300

Cash 5,300

To record the purchase of five $1,000, 5%, 3-year bonds at 106 -- interest payable semiannually

6-30-X3 Cash 125

Interest Income 75

Investment in Bonds 50

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)

12-31-X5 Cash 5,000



Available for Equity Method

Investments


4-1-X3 Investment 50,000

Cash 50,000

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

6-30-X3 Investment 2,500

Investment Income 2,5000

To record investor's share of Legg's reported income (25% X $10,000)

7-01-X3 Cash

1,000

Investment 1,000

To record the receipt of $1,000 in

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

Trading Securities


3-3-X6 Trading Securities 50,000

Cash 50,000

To record the purchase of 5,000 shares of Merriam stock at $10 per share

3-31-X6 Unrealized Loss on Investments 5,000

Trading Securities 5,000

To record a $1 per share decrease in the value of 5,000 shares of Merriam stock

4-30-X6 Trading Securities 15,000

Unrealized Gain on Investments 50,000

To record a $3 per share increase in the value of 5,000 shares of Merriam stock

Issuance of No-par Stock

Illustrative Entry XX-XX-X9 Cash 15,000,000

Common Stock 15,000,000

To record issuance of 3,000,000 shares of no-par common stock at $5 per share

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

Issuance of Par Value Stock



Paid in Capital in Excess of Par 12,000,000

To record issuance of 3,000,000 shares of $1 par value common stock at $5 per share

Issuance of Par Value Stock



Paid in Capital in Excess of Par 12,000,000

To record issuance of 3,000,000 shares of $1 par value common stock at $5 per share

Issuance of Preferred Stock


Preferred Stock 10,000,000

Paid in Capital in Excess -- PS 1,000,000

To record issuance of 100,000 shares of $100 par value preferred stock at 110


Job Costing

To Record Direct Materials, Direct

Labor, and Apply Factory Overhead 6-15-X3 Raw Materials Inventory 10,000


To record purchase of raw materials

6-20-X3 Work in Process Inventory 18,000

Raw Materials Inventory 10,000

Salaries Payable 3,000

Factory Overhead 5,000

To transfer raw materials to production, record direct labor costs on job, and apply overhead at the predetermined rate

6-21-X3 Finished Goods Inventory 18,000

Work in Process Inventory 18000

To transfer completed units to finished goods inventory


Sales 25,000

To record sale of finished pipe for $25,000

Cost of goods sold 18,000

Finished Goods Inventory 18,000

To transfer of finished goods to cost of goods sold

To Record Actual Overhead

6-30-X3 Factory Overhead 100,000

Salaries Payable

50,000

Supplies 15,000

Prepaid Insurance 5,000

Accumulated Depreciation 11,000

Taxes Payable 9,000

Utilities Payable 10,000

To record various factory overhead costs

To Record Overapplied Overhead 6-30-X3 Factory Overhead

10,000

Cost of Goods Sold 10,000

To reduce cost of goods sold for the overapplied overhead

To Record Underapplied Overhead 6-30-X3 Cost of Goods Sold 10,000


To transfer underapplied overhead to cost of goods sold

Loan Payable, Interest Accrual, and

Repayment


7-1-X1 Cash 100,000

Loan Payable 100,000

To record the borrowing of $100,000 at 6% per annum; principal and interest due on 12-31-X2



To record accrued interest for 6 months ($100,000 X 6% X 6/12)



Loan Payable 100,000

Cash 109,000

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

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

Payable

Notes Payable Issued at Discount


1-1-X8 Cash 9,000

Discount on Note Payable 10,000

Note Payable 10,000

To record note payable, issued at a discount


Discount on Note Payable 1,000

To record discount amortization

Note Payable 10,000

Cash 10,000

To record repayment of note

Notes Receivable


6-1-X1 Notes Receivable 10,000


To record conversion of an account receivable to a note receivable

9-1-X1 Cash 10,300

Interest Income 300

Notes Receivable 10,000

To record collection of note receivable plus accrued interest of $300 ($10,000 X 12% X 90/360)

or, if dishonored:


Interest Income 300

Notes Receivable 10,000

To record dishonor of note receivable plus accrued interest of $300 ($10,000 X 12% X 90/360)

Paying Accounts Payable

Illustrative Entry XX-XX-X9 Accounts Payable 2,000

Cash 2,000

Paid outstanding accounts payable

Payroll


7-31-XX Salaries Expense 3,000

Federal Income Tax Payable 349

State Income Tax Payable 117

Social Security Payable 180

Medicare/Medicaid Payable 45

Insurance Payable

175

Retirement Contribution Payable 200

Charitable Contribution Payable 25

Health/Child Flex Payable 75

Cash

1,834

To record payroll of Fictitious

7-31-XX Payroll Tax Expense 225

Employee Benefits Expense 675

Social Security Payable 180

Medicare/Medicaid Payable 45

FUTA Payable 0

SUTA Payable 0

Insurance Payable 475

Retirement Contribution Payable 200

To employer portion of payroll taxes and benefits

Petty Cash

Illustrative Entry

Establish Petty Cash Fund

1-31-X4 Petty Cash 1,000

Cash 1,000

To establish a $1,000 petty cash fund

Replenish Petty Cash Fund

2-28-X4 Supplies Expense 390

Fuel Expense 155

Miscellaneous Expense 70

Cash 615

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).

Perpetual Inventory

Illustrative Entry

Entry to record purchase of inventory:

12-12-X1 Inventory 3,000


Purchased $3,000 of inventory on account

Entries to record sale of inventory:

12-21-X1/ Accounts Receivable 5,000

Sales 5,000

Sold merchandise on account

12-21-X1 Cost of Goods Sold 3,000

Inventory 3,000

To record the cost of merchandise sold

Purchases and Purchases Returns

Illustrative Entry

XX-XX-XX Purchases 3,000


Purchased inventory on account

XX-XX-XX Accounts Payable 1,000

Purchase Returns & Allowances 1,000

To record the return of defective inventory to vendor

Purchases with Discount (gross)

Illustrative Entry

Entry to record initial purchase (gross):



Purchased inventory on account, terms 2/10,n/30

Entry to record payment within the discount period:

11-13-X7 Accounts Payable 5,000

Purchase Discounts 100

Cash 4,900

Paid outstanding payable within discount period, 2% discount taken ($5,000 X 2% = $100)

OR

Entry to record payment outside of the discount period:


Cash 5,000

Paid outstanding payable outside of the discount period

XX-XX-XX Purchases 3,000


Purchased inventory on account

Purchases with Discount (net)

Illustrative Entry

Entry to record initial purchase (net):



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:


Cash 4,900

Paid outstanding payable within discount period,

OR

Entry to record payment outside of the discount period:


Purchase Discounts Lost 100

Cash 5,000

Paid outstanding payable outside of the discount period

Prepaids


XX-XX-X9 Prepaid Rent 3,000

Cash 3,000

Prepaid a two-month lease

XX-XX-XX Rent Expense

1,500

Prepaid Rent 1,500

To adjust prepaid rent for portion lapsed ($3,000/2 months = $1,500)

Retirement of Debt


6-30-X5 Bonds Payable 200,000

Loss on Bond Retirement 15,800

Discount on Bonds Payable

5,800

Cash 210,000

To record retirement of debt (loss = $210,000 - ($200,000 - $5,800) = $15,800)

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 500

Revenue 500

Year-end adjusting entry to reflect "earned" revenues for services provided in December

Cash Revenue

Illustrative Entry

XX-XX-X9 Cash 4,000

Service Revenue 4,000

Provided services to customers for cash

Revenue on Account

Illustrative Entry

XX-XX-X9 Accounts Receivable 4,000

Service Revenue 4,000

Provide service to customer on account

Sales and Sales Returns

Illustrative Entry

XX-XX-XX Accounts Receivable 4,000

Sales 4,000

Sold merchandise on account

XX-XX-XX Sales Returns and Allowances 1,000


Customer returned merchandise previously purchased on account

Large Stock Dividend

Illustrative Entry XX-XX-X9 Retained Earnings 500,000

Common Stock 500,000

To record issuance of a 50% stock dividend (1,000,000 assumed shares outstanding X 50% X $1 per share par)

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 575,000

Common Stock 115,000

Paid in Capital in Excess of Par 460,000

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)

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 2,000,000

Cash 2,000,000

To record acquisition of treasury shares

Treasury Stock Reissue Above Cost

Illustrative Entry

XX-XX-XX Cash 400,000

Treasury Stock 250,000


To record reissue of 10,000 treasury shares at $40 per share

Treasury Stock Reissue Below Cost

Illustrative Entry

XX-XX-XX Cash 200,000


Treasury Stock 250,000

To record reissue of 10,000 treasury shares at $20 per share

Note: If Paid-in Capital had an inadequate balance, Retained Earnings could

be debited instead.

Unearned Revenues


XX-XX-X9 Cash 1,200

Unearned Revenue 1,200

Sold a one-year software license for $1,200

XX-XX-X9 Unearned Revenue 900

Revenue 900

Year-end adjusting entry to reflect "earned" portion of software license (9 months at $100 per month)

Variances


8-31-XX Raw Materials Inventory 328,000

Materials Price Variance

41,000


To record purchase of raw materials at standard price and related unfavorable variance

8-31-XX Work in Process Inventory 340,000

Raw Materials Inventory 328,000

Materials Quantity Variance 12,000

To transfer raw materials to production at standard usage rates and related favorable quantity variance


Labor Efficiency Variance 41,400

Labor Rate Variance 50,000

Wages Payable 175,000

To increase work in process for the standard direct labor costs, and record the related efficiency and rate variances


Variable Overhead Efficiency Variance 23,000

Variable OH Spending Variance 20,000


To increase work in process for the standard variable overhead, and record the related efficiency and spending variances


Fixed Overhead Volume Variance 10,800

Fixed OH Spending Variance 2,000


To increase work in process for the standard fixed overhead, and record the related volume and spending variances

Warranties


XX-XX-XX Cash 1,000,000

Sales 1,000,000

To record sales

XX-XX-XX Warranty Expense 30,000

Warranty Liability

30,000

To record estimated warranty cost equal to 3% of sales ($1,000,000 X 3%)

XX-XX-XX Warranty Liability 5,000

Cash 5,000

Repaired defective products under warranty at a cost of $5,000

journal entries

Documents

stock illustrative

transfer raw

discount illustrative

cost illustrative

x5 cash investment

account illustrative

par illustrative

treasury stock