Questions 8 and 9 refer to the following information: X Company prepares monthly

Question

Questions 8 and 9 refer to the following information: 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 $39,600, 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 7% was due in a year. The estimated life of the equipment is 10 years with a salvage value of $4,000. 3. Daily wages are $1,200 and are paid every Friday. The last day in January was a Tuesday. 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 Post Discussion Send Feedback

Explanation / Answer

Adjusting Journal entries on January 31 Date Account Titles Debit Credit Jan.31 Rent Expense $3,300.00 Prepaid Rent $3,300.00 (recording of 1 month rent) Jan.31 Interest Expense $262.50 Interest payable on Note $262.50 (recording 1 month interest due on note) Jan.31 Depreciation Expense $383.33 Accumulated depreciation - Equipment $383.33 (recording of 1 month depreciation) Jan.31 Salary and Wages Expenses $4,800.00 Salary and Wages Payable $4,800.00 (recording of 4 days wages due) Interest expense for Jan.31 = [$45000 * 7%] /12 months = $262.50 Depreciation expense per year = ($50000 - $4000)/10 years = $4600 Depreciation per month = $4600/ 12 months = $383.33 Decreased net income by total of Rent Expense $3,300.00 Interest Expense $262.50 Depreciation Expense $383.33 Salary and Wages Expenses $4,800.00 Decreased net income by total of $8,745.83 Decreased total assets by total of Prepaid Rent $3,300.00 Accumulated depreciation - Equipment $383.33 Decreased total assets by total of $3,683.33

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