X Company prepares monthly financial statements. The following transactions occu

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

Incorrect. Tries 1/3 Previous Tries

Explanation / Answer

8. The required adjusting entries on January 31 decreased net income by a total of $ 7,865.

Adjusting Entries :

Adjustment Account Titles Debit Credit January 31 $ $ a. Rent Expense ( $ 44,400 / 12) 3,700 Prepaid Rent 3,700 b. Interest Expense ( $ 54,000 x 7% x 1/12) 315 Interest Payable 315 c. Depreciation Expense $ ( 60,000 - 6,000) / ( 10 x 12) 450 Accumulated Depreciation : Equipment 450 d. Wages Expense ( $ 1,700 x 2) 3,400 Wages Payable 3,400

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