Journal Entries Flashcards
Stock Dividend at Date of Declaration
Dr: Retained Earnings
Cr: Common Stock to be distributed
Foreign Currency - Initial purchase
Foreign Currency - Payment made with currency gain
Dr: Purchase
Cr: Accounts Payable
Dr: Accounts Payable
Cr: Foreign exchange transaction gain
Cr: Cash
Shareholder’s Equity
It consists of Capital Stock, Additional paid-in capital (APIC), Retained earnings.
Foreign currency conversion
Under the remeasurement method, currency gain or loss is included in the net income of the company.
Under the translation method, the gain or loss is included as a part of other comprehensive income.
Foreign currency transaction
A transaction denominated in a foreign currency is recorded at the spot rate on the date of the transaction.
Change in common stock outstanding
If stock dividend or a stock split (or reverse split) changes common stock outstanding, the computation of EPS shall give retroactive recognition for all periods presented using the new number of shares because the reader’s primary interest is presumed to be related to current capitalization.
Form 8-K information
The form reports on major corporate events, including corporate asset acquisitions/disposals, accountant changes, financial statement changes, management changes, changes in securities, etc. Quarterly results of operations will be reported using Form 10-Q.
During consolidation, intercompany sale of inventory from parent to subsidiary was recorded incorrectly
Before closing books:
Dr: Inventory (S)
Cr: Intercompany Payable (S)
After closing books:
Dr: Retained Earnings (S)
Cr: Intercompany Payable (S)
For Subsidiary Company (S) to record the missing invoice:
Dr: Intercompany Expense 10,000
Cr: Intercompany Payable 10,000
To Eliminate Intercompany Balances in Consolidation:
Dr: Intercompany Payable (on S’s books) 150,000
Cr: Intercompany Receivable (on P’s books) 150,000
Sale of Equipment by Landon to Jacobs. Cash received in July and delivered goods in August. Journal Entry for the whole process
July Entry:
Dr: Cash 215,000
Cr: Unearned sales revenue 215,000
August Entry:
Dr: Unearned sales revenue 215,000
Cr: Sales revenue 215,000
Cost of goods sold 175,000
Inventory 175,000
Large stock dividend (more than 20% to 25% of previously outstanding shares)
Dr: Retained Earnings (Par value)
Cr: Common stock to be distributed (Par value)
Asset’s fair value increases subsequent to recording an impairment loss
Under U.S. GAAP, long-lived assets that are impaired can only have their carrying value restored if they are held for disposal. Assets that are held for continued use that are impaired are not permitted to have any restoration of carrying value. Keep in mind that any write-ups are limited to previous write-downs.
Entry to record the write-off of a specific account
Dr: Allowance for uncollectable accounts
Cr: Accounts receivable
Gross Method - Trade Receivables
(a) Journal Entry on Date of Sale:
Dr: Trade Receivables 1,000
Cr: Sales Revenue 1,000
(b) Entry if payment received within discount period:
Dr: Cash 980
Dr: Sales Discounts 20
Cr: Trade Receivables 1,000
(c) Entry if payment not received within discount period:
Dr: Cash 1,000
Cr: Trade Receivables 1,000
Net Method - Trade Receivables
(a) Journal entry on date of sale:
Dr: Cash 980
Cr: Trade Receivables 980
(b) Entry if payment received within discount period:
Dr: Cash 980
Cr: Trade Receivables 980
(c) Entry if payment not received within discount period:
Dr: Cash 1,000
Cr: Sale Discount Forfeited 20
Cr: Trade Receivables 980
Uncollectible Accounts Receivable (Allowance Method)
- Initial recording of the allowance for credit losses:
Dr: Bad Debt Expenses 5,000
Cr: Allowance for Credit Losses 5,000 - Writing off an uncollectible account (to reduce receivable and allowance):
Dr: Allowance for Credit Losses 1,000
Cr: Trade Receivables 1,000 - Recovery of a written-off account:
Reversing the Write-Off:
Dr: Trade Receivables 1,000
Cr: Allowance for Credit Losses 1,000
Recording the Cash Receipt:
Dr: Cash 1,000
Cr: Trade Receivables 1,000
Accounting for Sale Return
Recording the original sale:
Dr: Accounts Receivable 500
Cr: Sales Revenue 500
Journal entries for the return:
Adjusting Sales and Receivables
Dr: Sales Returns and Allowances 100
Cr: Accounts Receivable 100
Updating Inventory (if applicable)
Dr: Inventory 60
Cr: Cost of Goods Sold 60
Secured borrowing - Entry upon receiving funds
Dr: Cash
Cr: Note Payable
Factoring - upon receiving 90% cash from 100,000 receivables and retain 5% margin
Dr: Cash 90,000
Dr: Factor’s Fee 5,000
Dr: Loss on Sale of Receivables 5,000
Cr: Trade Receivables 100,000
Factoring with recourse - Entry to record liability and estimate 2% of receivables are uncollectible
Dr: Loss on Sale of Receivables 2,000
Cr: Liability for Recourse 2,000
Assignment - specific receivables used as collateral
Dr: Cash
Cr: Note Payable
Pledging
Dr: Cash
Cr: Line of Credit Payable
Finance Lease (Journal Entries)
Initial Journal Entry:
Dr: ROU Asset (Present Value)
Cr: Lease Liability (Present Value)
Subsequent Journal Entry (Year 1):
First Lease Payment
Dr: Lease Liability (Annual payment)
Cr: Cash (Annual payment)
Interest Expense Journal Entry (Remaining liability - annual interest):
Dr: Interest Expense (annual interest)
Cr: Lease Liability
(annual interest)
Amortization of ROU Asset (Sraight-line over life)
=ROU Asset / Asset Life
Dr: Amortization Expense
Cr: Accumulated Amortization - ROU Asset
Bonds Issued at a Discount
Journal Entry Year 1:
Dr: Cash
Dr: Discount on Bond
Cr: Bonds Payable
Paying Interest June Year 1:
Dr: Interest Expense
Cr: Cash
Dr: Interest Expense
Cr: Discount
Or
Dr: Interest expense
Cr: Cash
Cr: Discount
Bonds Issued at a Premium
Journal Entry Year 1:
Dr: Cash
Cr: Bonds Payable
Cr: Premium
Paying Interest June Year 1:
Dr: Interest Expense
Cr: Cash
Dr: Premium
Cr: Interest Expense
Or
Dr: Interest expense
Dr: Premium
Cr: Cash
Journal Entry to redeem bond after issuing on discount
Dr: Bonds Payable
Dr: Loss on debt extinguishment
Cr: Cash
Cr: Discount on Bonds Payable and unamortized bond issuance cost
Issuing bond at par between interest payment dates
Dr: Cash
Cr: Bonds Payable
Cr: Unamortized Bond Premium
Cr: Bond Interest Payable
Assume $1,000 note bearing interest at 12%. At 8/15 (one month after the note date of 7/15) the JE would be:
Dr: Note receivable $1,000
Dr: Interest receivable 10 ($1,000 x 12% x 1/12)
Cr: Revenu 1,010
Large stock dividend (More than 20% to 25%
Date of Declaration:
Dr: Retained Earnings
Cr: Common stock to be distributed
Small Stock Dividend (Less than 20% or 25%)
Date of Declaration:
Dr: Retained Earnings
Cr: Common stock to be distributed
Cr: Additional paid-in-capital from stock dividend
Write-off an uncollectible account under the allowance method has no effect on net income.
Dr: Allowance for uncollectible accts
Cr: Accounts receivable
Amortize Asset as Held for Sale
Dr: Loss on Write-Down of Assets Held for Sale
Cr: Accumulated Depreciation (Balance Sheet)
