X Company prepares monthly financial statements. The following transactions occu
ID: 2598296 • Letter: X
Question
X Company prepares monthly financial statements. The following transactions occurred during January:
On January 1, a one-year store rental lease was signed for a total of $44,400, and rent for the first 3 months was paid in advance.
On January 1, equipment was purchased for $60,000 with a downpayment of $6,000 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 $6,000.
Daily wages are $1,700 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
9. The required adjusting entries on January 31 decreased total assets by a total of
Explanation / Answer
8 Decrease in net income: Rent 3700 =44400/12 Depreciation 450 =(60000-6000)/10/12 Interest expense 315 =54000*7%/12 Wages 3400 =1700*2 Decrease in net income 7865 9 Decrease in total assets = 450+3700= 4150
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