Question

Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Step 3: Record an adjusting entry to get from step 1 to step 2. Assume no other adjusting entries are made during the year.

a. Accounts Receivable. At year-end, the Krug Company has completed services of $21,000 for a client, but the client has not yet been billed for those services.
b. Interest Receivable. At year-end, the company has earned, but not yet recorded, $470 of interest earned from its investments in government bonds.
c. Accounts Receivable. A painting company collects fees when jobs are complete. The work for one customer, whose job was bid at $1,460, has been completed, but the customer has not yet been billed.

Answer 1

a. Account receivable and sales are understated.

Adjusting entry :

Accounts Receivable (Dr.) $21,000

Sales Revenue (Cr.) $21,000

b. Interest receivable is understated.

Adjusting Entry :

Interest Receivable (Dr.) $470

Interest Earned (Cr.) $470

c. Account receivable and sales are understated.

Adjusting entry :

Accounts Receivable (Dr.) $1,460

Sales Revenue (Cr.) $1,460

Step-by-step explanation:

Adjusting entries will be created for the transactions that are not properly recorded or either completely not recorded. In the given case the customer is not billed for the services rendered. This has an impact on the asset account of the company because account receivable are understated.