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29 December, 00:23

The trial balance of Woods Company includes the following balance sheet accounts. Identify the accounts that might require adjustment. For each account that requires adjustment, indicate (1) the type of adjusting entry and (2) the related account in the adjusting entry. Account (1) Type of Adjustment (2) Related Account (a) Accounts Receivable. (b) Prepaid Insurance. (c) Equipment. (d) Accumulated Depreciation-Equipment. (e) Notes Payable. (f) Interest Payable. (g) Unearned Service Revenue.

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  1. 29 December, 03:06
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    The account wise answers are given below

    Explanation:

    a) Account receivable are adjusted for any doubtful debts and uncollectible accounts from customers.

    In this account, the adjusting entry we make as follows

    Bad debt Expense Dr.$$

    Provision for Bad debts Cr. $$

    When it is certain that customer will no longer pay the specified amount, the write off entry is made as follows

    Provision for Bad Debts Dr. $$

    Accounts Receivable Cr. $$

    b) Prepaid Insurance

    It is adjusted when the period for it is paid in advance has lapsed or expired then expense is recorded and prepaid insurance is reduced

    The adjusting entry is made as follows,

    Insurance Expense Dr.$$

    Prepaid Insurance Cr.$$

    c) & d) Equipment & Accumulated Depreciation

    The Assets are adjusted over their useful life for depreciation. When an asset is used during whole year, its cost is reduced and that reduction is recorded as deprecation expense and accumulated depreciation.

    The Adjusting Entry is made

    Depreciation Expense Dr. $$

    Accumulated Depreciation Cr. $$

    When asset is sold the adjusting entry is made,

    Accumulated Depreciation Dr. $$

    Asset-Equipment Cr. $$

    e) Notes Payable & f) Interest payable

    These are liabilities. When any expense is accrued and any interest is payable but not paid on loan received is recoded is liability.

    The adjusting entry is made,

    Interest Expense/Notes Expense Dr.$$

    Interest Payable or Notes Payable Cr.$$

    g) Unearned Service Reveune

    It is liability in nature when services are not rendered but amount for those services is paid in advance then its called unearned service revenue.

    When those services are actually rendered to customers, the adjusting entry is made,

    Unearned Service revenue Dr. $$

    Service revenue Cr. $$
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