Q6E - Intermediate Accounting (Kieso)

Question

E3-6 (L03) (Adjusting Entries) Karen Weller, D.D.S., opened a dental practice on January 1, 2017. During the first month ofoperations, the following transactions occurred.1. Performed services for patients who had dental plan insurance. At January 31, \(750 of such services was performed but notyet billed to the insurance companies.2. Utility expenses incurred but not paid prior to January 31 totaled \)520.3. Purchased dental equipment on January 1 for \(80,000, paying \)20,000 in cash and signing a \(60,000, 3-year note payable.The equipment depreciates \)400 per month. Interest is \(500 per month.4. Purchased a one-year malpractice insurance policy on January 1 for \)12,000.5. Purchased \(1,600 of dental supplies. On January 31, determined that \)500 of supplies were on hand.InstructionsPrepare the adjusting entries on January 31. (Omit explanations.) Account titles are Accumulated Depreciation—Equipment,Depreciation Expense, Service Revenue, Accounts Receivable, Insurance Expense, Interest Expense, Interest Payable, PrepaidInsurance, Supplies, Supplies Expense, Utilities Expenses, and Accounts Payable.

Step-by-Step Solution

Answer

The journal entries are shown in step 2

Step 1: Meaning of Adjusted Journal Entry

The adjusted journal entry means an entry that is only recorded when there is any unrecognized entry that has not been recorded in the journal entry.

Step 2: Preparation of adjustingjournal entries

Karen Weller, D.D.S.,
Adjusting Journal entries
Date	Account and explanation	Debit $	Credit $
Jan 31	Account receivable	750
	Service revenue		750
	(Toservice revenue received)
Jan 31	Utility expenses	520
	Account payable		520
	(Toutilities expenses recorded)
Jan 31	Depreciation expenses	400
	Accumulated depreciation-Equipment		400
	(Toaccumulated depreciation is recorded)
Jan 31	Interest expenses	500
	Interest payable		500
	(Tointerest payable is recorded)
Jan 31	Insurance expense ( $12000/12 = $1000)	1000
	Prepaid insurance		1000
	(Toprepaid insurance is recorded)
Jan 31	Supplies expenses ($1600-$500 (in hand) = $1100)	1100
	Supplies		1100
	(To supplies expensesare recorded)

 

Note – Purchaseddental equipment on January 1 for $80,000, paying $20,000 in cash and signing a $60,000, 3-year note payable. January 1 means it will be recorded at the start of the journal entry. Hence, no need foran adjustment entry.