Done Expert Q&A; Please be clear about what the answer is only answer if you\'re
ID: 2598365 • Letter: D
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Done Expert Q&A; Please be clear about what the answer is only answer if you're positive! X Company prepares monthly financial statements. The following transactions during January On January 1, a one year store rental lease was signed for a total of $33,600, and rent for the first 4 months was paid in advance. 2. On January 1, equipment was purchased for $60,000 with a downpayment of $6,000 interest of 8% was due in and a note for the remainder. The note along with annual a year. The estimated life of the $4,000 equipment is 10 years with a salvage value of 3. Daily wages are $1,900 and are paid every Friday. The last day in January was a Monday. 8. The entries on January 31 decreased net income by a total of Ties 03 9. The t ad entries on January 31 decreased total assets by a total of bit Arawes Tries 0/3Explanation / Answer
1. Calculation of total expenses to be booked as adjusting entry for Jan
a. Expense of one month for lease rental = 33,600 / 12 = $2,800 (When paid in advance, the same was booked as prepaid expense now reversed)
b. One month depreciation on equipment = (60,000 - 4,000) / 10 years = 5,600 / 12 = $466.67 Approx.
c. Wages - Since last day was monday in January, the company must have paid wages till 28th January i.e last friday of the month. Therefore, 3 remanining days wages (29, 30 & 31st Jan) is required to be booked as expense.
Wages Expense = 1,900 x 3 = $5,700
Total Decrease in net income = $2,800 + 466.67 + 5,700 = $8,966.67
NOTE: Since the interest on notes is payable & due on annual basis, the same is not required to be booked as expense at the end of the jan month.
b. Calculation of decrease in total assets
a. Decrease in prepaid expense = $2,800 (The amount by which expense is booked by reversal of prepaid expense)
b. Decrease in net value equipment = $466.67
Total Decrease in assets = $3,266.67
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