1. Accounting 3 Chapter 25 Section 2 Worksheets for Corporations

2. Use of a Worksheet Worksheets for corporations are similar to those of proprietorships and partnerships.Worksheets for corporations are similar to those of proprietorships and partnerships. Preparing the Trial Balance is the same with the exception that it is much longer.Preparing the Trial Balance is the same with the exception that it is much longer. What is different are the number, and one type, of adjustments that are made.What is different are the number, and one type, of adjustments that are made.

3. Corporate Adjustments As usual general ledger accounts need to be brought up to date before financial statements are prepared.As usual general ledger accounts need to be brought up to date before financial statements are prepared. There are nine adjustments that need to be made for a corporation:There are nine adjustments that need to be made for a corporation: –Interest Income –Uncollectible Accounts Expense –Merchandise Inventory –Supplies –Prepaid Insurance –Depreciation Expense-Office Equipment –Depreciation Expense-Store Equipment –Interest Expense –Federal Income Tax All will be covered in this section except Federal Income Tax.All will be covered in this section except Federal Income Tax.

4. Interest Income Adjustment Interest Income earned during the current fiscal period but not yet received needs to be recorded.Interest Income earned during the current fiscal period but not yet received needs to be recorded. Interest Receivable and Interest Income are used to do this.Interest Receivable and Interest Income are used to do this. Interest Income has to be increased due to revenue we will receive later; so a credit is made in the adjustment section of the worksheet.Interest Income has to be increased due to revenue we will receive later; so a credit is made in the adjustment section of the worksheet. Interest Receivable is increased by the same amount as Interest Income; so a debit is made in the adjustment section.Interest Receivable is increased by the same amount as Interest Income; so a debit is made in the adjustment section.

5. Example Account Title Trial BalanceAdjustments Debit Credit Worksheet Interest Receivable (a) 2 0 00 Interest Income 6 8 00 (a) 2 0 00

6. Uncollectible Accounts Expense Adjustment The estimated amount of uncollectible accounts expense for a fiscal period needs to be brought up to date.The estimated amount of uncollectible accounts expense for a fiscal period needs to be brought up to date. The Uncollectible Accounts Expense and Allowance for Uncollectible Accounts Account is used.The Uncollectible Accounts Expense and Allowance for Uncollectible Accounts Account is used. Allowance for Uncollectible needs to be increased to show the proper amount; so a credit is made in the adjustment section.Allowance for Uncollectible needs to be increased to show the proper amount; so a credit is made in the adjustment section. Uncollectible Accounts Expense needs to also be increased to show the proper amount; so a debit is made in the adjustment section.Uncollectible Accounts Expense needs to also be increased to show the proper amount; so a debit is made in the adjustment section.

7. Example Account Title Trial BalanceAdjustments Debit Credit Worksheet Allowance for Uncollectible Accounts 3 2 0 00 (b)9 8 2 8 00 Uncollectible Accounts Expense (b) 9 8 2 8 00

8. Merchandise Inventory Adjustment The merchandise inventory account balance in a trial balance is the beginning inventory for a fiscal period.The merchandise inventory account balance in a trial balance is the beginning inventory for a fiscal period. The amount of the ending inventory is determined by counting the merchandise on hand at the end of the fiscal period.The amount of the ending inventory is determined by counting the merchandise on hand at the end of the fiscal period. The pairing account for this adjustment is Income Summary.The pairing account for this adjustment is Income Summary. Ending MI – Beginning MI = Adjustment to MIEnding MI – Beginning MI = Adjustment to MI

9. Account Title Trial BalanceAdjustments Debit Credit Worksheet Merchandise Inventory 238 7 5 8 00 © 6 1 5 8 00 Income Summary © 6 1 5 8 00

10. Supplies and Prepaid Insurance Adjustment These adjustments are done in the same manner as we have always done them.These adjustments are done in the same manner as we have always done them. Just remember that when you decrease these accounts you will use the adjustment credit column.Just remember that when you decrease these accounts you will use the adjustment credit column. The pairing accounts for these adjustments are Insurance Expense and Supplies Expense.The pairing accounts for these adjustments are Insurance Expense and Supplies Expense.

11. Account Title Trial BalanceAdjustments Debit Credit Worksheet Supplies 9 1 5 8 00 (a) 7 4 7 2 00 Prepaid Insurance 12 4 0 0 00 (b) 9 8 5 0 00 Insurance Expense (b) 9 8 5 0 00 Supplies Expense (a) 7 4 7 2 00

12. Depreciation Expense Adjustments There are usually two Depreciation Expense Adjustments; one for Office Equipment and one for Store Equipment.There are usually two Depreciation Expense Adjustments; one for Office Equipment and one for Store Equipment. Refer to chapter 21 if you need a refresher on these types of adjustments.Refer to chapter 21 if you need a refresher on these types of adjustments. The pairing accounts for these adjustments are Accumulated Depreciation and Depreciation Expense.The pairing accounts for these adjustments are Accumulated Depreciation and Depreciation Expense. Remember that you credit AD because you are adding to it.Remember that you credit AD because you are adding to it.

13. Account Title Trial BalanceAdjustments Debit Credit Worksheet Accumulated Depreciation-Office Equipment 6 1 7 3 00 (f) 4 6 5 0 00 Accumulated Depreciation-Store Equipment 7 0 5 4 00 (g) 8 7 5 0 00 Depreciation Expense-Office Equipment (f) 4 6 5 0 00 Depreciation Expense-Store Equipment (g) 8 7 5 0 00

14. Interest Expense Adjustment Interest Expense incurred during the current fiscal period but not yet paid needs to be recorded.Interest Expense incurred during the current fiscal period but not yet paid needs to be recorded. The two accounts used are Interest Payable and Interest Expense.The two accounts used are Interest Payable and Interest Expense. You will be adding to both of these accounts so an adjustment credit is made to Interest Payable and an adjustment debit is made to Interest Expense.You will be adding to both of these accounts so an adjustment credit is made to Interest Payable and an adjustment debit is made to Interest Expense.

15. Account Title Trial BalanceAdjustments Debit Credit Worksheet Interest Payable (h) 2 0 0 00 Interest Expense 1 1 4 3 00 (h) 2 0 0 00

16. Work Together p. 645 This problem starts in Section 2 and continues to Section 3. The following is the information given in the textbook. I have added explanations as to where the numbers have come from so you can better understand the reasoning behind the number placement. Accrued Interest Income ………………………………$ 277.20 (Actual Adjustment Amount) Uncollectible accounts expense, estimated at 1.5% of sales on account. Sales on account for year $499,000.00. (Figure the amount of the adjustment) Merchandise Inventory ………………………………...$ 90,066.26 (Ending Inventory) Supplies Inventory ……………………………………..$327.88 (Ending Inventory) Value of Prepaid Insurance …………………………….$3,023.60 (Ending Value) Annual Depreciation Expense – Office Equipment ……$2,690.00 (Actual Adjustment Amount) Annual Depreciation Expense – Store Equipment ……..$1,607.60 (Actual Adjustment Amount) Accrued Interest Expense ……………………………...$545.16 (Actual Adjustment Amount)

17. Account Title Trial BalanceAdjustments Debit Credit Worksheet Webster Corporation For Year Ended December 31, 2006 Interest Receivable (a) 2 7 7 20 I am only including the accounts that are adjusted. Not enough room for all. Allowance for Uncollectible Accounts 4 4 64 (b) 1 4 8 5 00 Merchandise Inventory 64 3 1 6 30 © 25 7 4 9 96 Supplies 2 5 5 2 08 (d) 2 2 2 4 20 Prepaid Insurance 9 0 7 1 60 (e) 6 0 4 8 00 Accumulated Depreciation-Office Equipment 6 7 3 5 00 (f) 2 6 9 0 00 Accumulated Depreciation-Store Equipment 6 3 5 7 40 (g) 1 6 0 7 60 Interest Payable (h) 5 4 5 16 Income Summary © 25 7 4 9 96 Depreciation Expense-Office Equipment (f) 2 6 9 0 00 Depreciation Expense-Store Equipment (g) 1 6 0 7 60 Insurance Expense (e) 6 4 0 8 00 Supplies Expense (d) 2 2 2 4 20 Uncollectible Accounts Expense (b) 7 4 8 5 00 Interest Income 8 9 4 48 (a) 2 7 7 20 Interest Expense 2 0 8 6 14 (h) 5 4 5 16 For easy reference to given information. When you get finished with all of these adjustments, DO NOT TOTAL THE COLUMNS. This will be done in the next section.

18. Assignment Do Application 25-3 by hand.Do Application 25-3 by hand. Turn into Mrs. Middleton.Turn into Mrs. Middleton. Move on to Section 3.Move on to Section 3.