Sheet (5)

Tegara English
First year

Financial
Accounting
‫لمتابعه جميع المواد الخاصة بتجاره انجلش برجاء سرعة‬
‫الدخول على جروب الدفعة‬
‫اسم جروب الدفعة‬

Groub: Faculty of Commerce English Section

& BIS Department

Edited by Dr/ Magdy Kamel

Tel/ 01273949660
1 | Page Dr. magdy kamel Tel/ 01273949660
a) Apportioning of recorded costs
Items ( 4) depreciation of fixed assets ( long term assets )

a) direct method
Straight line method
B) accumulated depreciation

cost of fixed assets - residual value

Depreciation expense = estimated useful life

Example (1)
Cost of machine = 55,000, purchased on jan 1, 2009
residual value at the end of estimated useful life = 5,000 ,
Estimated useful life = 10 years
Required
a) Compute the annual depreciation expense by using straight line method
b) Prepare the adjusting entry to record the depreciation of machine by using
1) direct method
2) straight line method
solution

55 000 - 5 000
a) annual depreciation expense = 10 = 5,000

b) adjusting entry
1) direct method
Date Account title Acc- no Debit Credit
31/12 Depreciation expense – machine 5,000
Machine 5,000

2) accumulated depreciation method

Date Account title Acc- no Debit Credit
31/12 Depreciation expense – machine 5,000
Accumulated depreciation -machine 5,000

2 | Page Dr. magdy kamel Tel/ 01273949660

Example (2)
On April 1, 2015, furniture purchased amounted to 35,000 ,
estimated useful life = 10 years , residual value = 5,000

Required

1) compute annual depreciation expense of furniture for 2015, 2016

2) prepare adjusting entry by using

a) Direct Method
b) accumulated depreciation method

Solution
35 000 - 5 000 9
depreciation Exp for 2015  1/4 31/12 = 10 × 12 = 2,250

35 000 - 5 000
depreciation expense for (2016)  1/1 31/12 = 10 = 3,000

adjusting entries
a) direct method
Date Account title Acc- Debit Credit
no
31/12/2015 Depreciation expense –furniture 2,250
Furniture 2,250
31/12/2016 Depreciation expense – furniture 3,000
Furniture 3,000

b) accumulated depreciation
Date Account title Acc- no Debit Credit
31/12/2015 Depreciation expense – furniture 2,250
Acc- depreciation – furniture 2,250
31/12/2016 Depreciation expense – furniture 3,000
Acc- depreciation – furniture 3,000

3 | Page Dr. magdy kamel Tel/ 01273949660

b) apportioning of unearned revenue ‫توزيع ايرادات غير محققه‬
‫دفع ليك فلوس "ايراد " مقدما ولسه مادتش الخدمه بتاعته‬

example (1)
Unearned service revenue from trial balance 20,000, unearned service revenue
include 5,000, service rendered to some customer before the end of the year

Solution
1) adjustment
 Unearned service revenue = 20,000 – 5,000 = 15,000  Adjusted T-B
 Service revenue = 5,000  Adjusted T-B

2) adjusting entries
Date Account title Acc- no Debit Credit
31/12 Unearned service revenue 5,000
Service revenue 5,000

Example (2)
Unearned service revenue from trial balance 30,000 , service revenue = 90,000
Additional information, Unearned service revenue including 10,000 service
rendered before the end of the year.

Required : prepare adjustment and adjusting entries

Solution
1) adjustment
 Unearned service revenue (liabilities) = 30,000 – 10,000 = 20,000
 Service revenue = 90,000 + 10,000 = 100,000

2) adjusting entries
Date Account title Acc- no Debit Credit
31/12 Unearned service revenue 10,000
Service revenue 10,000

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C) Recorded Of Unrecorded Expense ‫تسجيل مصاريف غير مسجلة‬
‫يبقى الزم اسجلها‬ ‫ولم اسجلها‬ ‫مصاريف تمت بالفعل‬

example (1)
salaries expense from trial balance = 33,000 , additional information , monthly
salaries = 3,000
solution
1) adjustment
 annual rent expense = 12 × 3,000 = 36,000  Adjusted T-B
 salaries payable = 36,000 – 33,000 = 3,000  Adjusted T-B

2) adjusting entry
Date Account title Acc- no Debit Credit
31/12 Salaries expense 3,000
Salaries payable 3,000

Example (2)
Rent expense from trial balance = 40,000 , additional information , rent expense
paid for 10 months.

Required Prepare adjustment and adjusting entries at 31/12

Solution
1) adjustment
40 000
 Monthly rent = 10 = 4,000
 annual rent expense = 12 × 4,000 = 48,000  Adjusted T-B
 rent payable = 48,000 – 40,000 = 8,000  Adjusted T-B

2) adjusting entry
Date Account title Acc- no Debit Credit
31/12 Rent expense 8,000
rent payable 8,000

5 | Page Dr. magdy kamel Tel/ 01273949660

Example (3)
A ten month loan had been obtained on august 31 for amount of 60,000.
Interest is to be computed at an annual rate of 10% and is payable when the
loan is due. No interest has been paid or recorded

Required : prepare adjusting entries required at 31 of December

Solution

1) Adjustment
4
Interest Expense on Loan = 60,000 × 10% × 12 = 2,000
Interest Payable = 2,000

2) Adjusting Entry
Date Account Title Acc-no Debit Credit
31/12 Interest Expense 2,000
Interest Payable 2,000

D) Recorded of Unrecorded Revenue ‫تسجيل ايرادات غير مسجلة‬

Example (1)
account receivable from trial balance 60,000
service revenue from trial balance 90,000
additional information
service rendered to some customer amounted to 5,000 not collected or
recorded yet.

Solution
1) Adjustment
 account receivable = 60,000 + 5,000 = 65,000  adjusted T-B
 Service revenue = 90,000 + 5,000 = 95,000  Adjusted T-B
2) adjusting entry
Date Account title Acc - no Debit Credit
31/12 Account receivable 5,000
Service revenue 5,000

6 | Page Dr. magdy kamel Tel/ 01273949660

Example (2)
Maintenance service revenue from trial balance = 120,000
Account receivable from trial balance = 90,000 , additional information ,
Service rendered to some customers at the end of the year amounted to 10,000
not collected or recorded yet.

Solution
1)Adjustment
 account receivable = 90,000 + 10,000 = 100,000  adjusted T-B
 Service revenue = 120,000 + 10,000 = 130,000  Adjusted T-B
2) adjusting entry
Date Account title Acc-no Debit Credit
31/12 Account receivable 10,000
maintenance Service revenue 10,000

Exam (2016) second question

Ahmed firm adjusts its accounts monthly. Prepare the adjusting entries required
at 31 of October 2013 based on the following information:

a. on October 1, five months' rent was paid in advance amounted to 10,000.

b. a fire insurance policy was purchased on september 1, and the premium of

$18,000 for the first six months was paid in advance and recorded in prepaid
insurance.

c. the equipments are being depreciated over a period of 10 years. The residual
value is $5,000 (the cost of the equipment is $29,000).

d. A ten month loan had been obtained on august 31 for amount of $60,000.
Interest is to be computed at an annual rate of 12% and is payable when the
loan is due. No interest has been paid or recorded yet.

e. some clients made an advance payment for services to be rendered in future

amounted to $7,000. These advances were credited to the unearned revenue
account. $4,000 of these advances were earned by the business.

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f. salaries earned by employees in October but not recorded or paid yet were
$3,000
g. services rendered to some customers at 31 of October but not collected or
recorded yet amounted to $5,000.
Solution
a) 1) adjustment
10000
 monthly rent expense = 5 = 2,000
 Prepaid rent = 10,000 – 2,000 = 8,000

2) adjusting entry
Date Account title Acc-no Debit Credit
31/10/2013 Rent expense 2,000
Prepaid rent 2,000

b) 1) adjustment
18000
 monthly insurance = 6 = 3,000
 Insurance expense = 3,000
 prepaid insurance = 18,000 – (3,000 ×2) = 12,000

2) Adjusting entry
Date Account title Acc-no Debit Credit
31/10 Insurance expense 3,000
Prepaid insurance 3,000

c) depreciation of equipment
1) adjustment
cost of equipment = 29,000 estimated useful life = 10
residual value = 5,000
cost-residual value
monthly depreciation expense = estimated useful life

29000-5000 1
= 10 × 12 = 200

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2) Adjusting entry
Date Account title Debit Credit
31/10 Depreciation expense-equipment 200
/2013 Accumulated depreciation-equipment 200

D)
1) Adjustment
1
 Interest Expense = 60,000 ×12% × 12 = 600
 Interest Payable = 600

2) adjusting entry
Date Account title Acc-no Debit Credit
31/10/2013 Interest expense 600
interest payable 600

e)
1) adjustment
 unearned service revenue = 7,000 – 4,000 = 3,000
 service revenue = 4,000

2) Adjusting entry
Date Account title Acc-no Debit Credit
31/10 Unearned service revenue 4,000
/2013 service revenue 4,000

f)
1) adjustment
 salaries expense = 3,000
 salaries payable = 3,000

2) Adjusting entry
Date Account title Acc-no Debit Credit
31/10/2013 Salaries expense 3,000
Salaries payable 3,000

9 | Page Dr. magdy kamel Tel/ 01273949660

g)
1) adjustment
 accounts receivable = 5,000
 service revenue = 5,000

2) Adjusting entry

Date Account title Acc-no Debit Credit

31/10 Accounts receivable 5,000
Service revenue 5,000

10 | Page Dr. magdy kamel Tel/ 01273949660