X Company prepares monthly financial statements. The following transactions occu

Question

X Company prepares monthly financial statements. The following transactions occurred during January: 1. On January 1, a one-year store rental lease was signed for a total of $24,000, and rent for the first 4 months was paid in advance. 2. On January 1, equipment was purchased for $50,000 with a downpayment of $5,000 and a note for the remainder. The note along with annual interest of 8% was due in a year. The estimated life of the equipment is 10 years with a salvage value of $6,000 3. Daily wages are $2,000 and are paid every Friday. The last day in January was a Monday. 8. The required adjusting entries on January 31 decreased net income by a total of Submit Answer Tries 0/3 9. The required adjusting entries on January 31 decreased total assets by a total of Submit Answer Tries 0/3

Explanation / Answer

8)

Expenses incurred in January:

Lease rental = 24000/12 = 2000

Interest accrued on equipment = (50000-5000)*8%*1/12 = 300

Depreciation expense = (50000 - 6000)/10 = 44000/10 = 4400

Daily wage expenses = 2000*31 = 62000

Decrease in net income = 2000+300+4400+62000 = 68700

9)

Decrease in prepaid lease rent as on 31st January = 2000

Decrease in cash for payment of daily wages = 2000*28 = 56000

Increase in fixed assets for purchase of equipment = 50000

Decrease in cash for making down payment = 5000

Decrease in total assets = 2000+56000-50000+5000 = 13000

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