A partial work sheet for Milnor Company is shown below. Problem 27-8B Data for adjusting the accounts are as follows:

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A partial work sheet for Milnor Company is shown below. Problem 27-8B Data for adjusting the accounts are as follows:

A partial work sheet for Milnor Company is shown below. Problem 27-8B Data for adjusting the accounts are as follows:

(a) Factory overhead to be applied to work in process ending inventory $4,400
(b) Interest receivable 190
(c) Interest payable 1,420
(d) Estimate of uncollectible accounts, based on an aging of accounts receivable 4,450
(e) Office supplies consumed 4,200
(f) Factory supplies consumed 3,800
(g) Insurance on factory building and equipment expired 6,800
(h) Factory building depreciation 8,000
(i) Factory equipment depreciation 5,000
(j) Overapplied factory overhead 4,340
(k) Provision for corporate income taxes 6,400

1. Prepare the December 31 adjusting journal entries for Milnor Company.

2. Prepare the December 31 closing journal entries for Milnor Company.

3. Prepare the reversing journal entries as of January 1, 20-2, for Milnor Company.

Answer & Explanation (3)

1
Explanation
The general journal is the book where entries are initially made relating to financial transactions entered into by the company.

(a) The journal entry is a debit to work in process inventory and a credit to factory overhead of $4,400 for the applied factory overhead.

(b) The journal entry is a debit to interest receivable and a credit to interest revenue $190 for the accrual of interest revenue earned.

(c) The journal entry is a debit to interest expense and a credit to interest payable of $1,420 for the accrual of unpaid interest expense.

(d) The journal entry is a debit to bad debts expense and a credit to allowance for doubtful accounts of $3,200, which is the difference of estimated uncollectible accounts of $4,450 less beginning balance of allowance for doubtful accounts account of $1,250, for the adjustment of estimated uncollectible accounts.

(e) The journal entry is a debit to office supplies expense and a credit to office supplies of $4,200 for the consumed office supplies.

(f) The journal entry is a debit to factory overhead subsidiary account on factory supplies expense and a credit to factory supplies of $3,800 for the consumed factory supplies.

(g) The journal entry is a debit to factory overhead subsidiary account on insurance expense and a credit to prepaid insurance of $6,800 for the expired portion of insurance for factory building and equipment.

(h) The journal entry is a debit to factory overhead subsidiary account on depreciation expense-factory building and a credit to accumulated depreciation-factory building of $8,000 for the depreciation of the factory building.

(j) The journal entry is a debit to factory overhead subsidiary account on depreciation expense-factory equipment and a credit to accumulated depreciation-factory equipment of $5,000 for the depreciation of the factory equipment.

(k) The journal entry is a debit to factory overhead and a credit to cost of goods sold of $4,340 for adjustment on factory overhead cost to actual amount.

(l) The journal entry is a debit to income tax expense and a credit to income tax payable of $6,400 for the accrual of unpaid income tax expense.

2
Explanation
The general journal is the book where entries are initially made relating to financial transactions entered into by the company.

The first journal entry is a debit to income summary and a credit to factory overhead subsidiary ledgers of $112,500 to transfer the debit balance to income summary and close the subsidiary factory overhead accounts.

The second journal entry is a debit to factory overhead and a credit to income summary of $112,500 to transfer the credit balance to income summary and close the factory overhead account.

The third journal entry is a debit to sales of $395,200 and to interest revenue of $990, and a credit to income summary of $396,190 to transfer the credit balance to income summary and close the revenue accounts.

The fourth journal entry is a debit to income summary of $330,680, and a credit to cost of goods sold of $190,2600, wages expense of $90,000, office supplies expense of $4,200, bad debts expense of $3,200, utilities expense-office of $7,200, interest expense of $10,420 and income tax expense of $25,400 to transfer the debit balance to income summary and close the remaining expense accounts.

The last journal entry is a debit to income summary, and a credit to retained earnings of $65,510 for the balance of income summary transferred and closed to retained earnings.

3
Explanation
The general journal is the book where entries are initially made relating to financial transactions entered into by the company.

The first journal entry is a debit to factory overhead and a credit to work in process inventory of $4,400 to reverse adjusting entry to apply overhead to work in process.

The second journal entry is a debit to interest revenue and a credit to interest receivable of $190 to reverse adjusting entry related to accruals.

The last journal entry is a debit to interest payable and a credit to interest expense of $1,420 to reverse adjusting entry related to accruals.

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