Question

The company’s heat, electric, water, and related utility bills had not been received when Joan
pre pared the financial statements, so she accrued a total amount of $1,000 for the three bills in
the trial balance. When the final invoices arrived, the cost actually totaled $2,500, due to an
extremely cold winter and repairs needed to a frozen water pipe. In addition, there was $10,000
damage (to carpets and so on) due to the flooding caused by the frozen pipe. Joan did not record
the $10,000 amount disbursed because it should be covered by the company’s insurance policy.
There is an $800 deductible on the insurance claim that remains outstanding and will be
deducted from the reimbursement from the insurance company.

Require : prepare journal entries

Answer 1

Adjusting Journal Entries
Account	Dr $	Cr $	Remarks
Utility Expenses		1,000	Adjusting entry for reversal of earlier accrual
Other Expense Payable	1,000		( Accrual made for $1000, actual Inv amount $2500)
Utilities expense	2,500		Accounting for actual utilities bills of
Accounts Payable		2,500	$2,500
Insurance Claim Receivable	9,200		Adjusting entry for the carpet damage insurance
Abnormal Loss	800		claim receivable , less the $800 deductible.
Cash		10,000	Cash payment made against the damage claim