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 $37,200, and rent for the first 3 months was paid in advance. 2, on January 1, equipment was purchased for $50,000 with a downpayment of $10,000 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 $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 12867 Submit Answer Incorrect. Tries 2/3 Previous Tries 9. The required adjusting entries on January 31 decreased total assets by a total of 12767 Submit Answer Incorrect. Tries 1/3 Previous Tries

Explanation / Answer

Net Income Total Assets Particulars Amt.($) Inc/Dec Working Particulars Amt.($) Inc/Dec Working Rent for the month of Jan 3100 Decrease (37200*1/12) Rent Advance for 2 months 6200 Increase (37200*2/12) Depreciation on equipment 5400 Decrease (50000-6000)/10 Purchase of equipment 50000 Increase --- Interest on note 267 Decrease (40000*8%)/12 Daily wages 45900 Decrease (1700*27) Decreased Net Income 54667 Increased total assets 56200 Assumptions: 1. rent paid in advance is not treated as deposit and hence one month rent is asjusted to january. 2. The question asks for "Total Assets" and hence note of 40000 and outstanding wages of 6800(1700*4) is ignored 3. Total assets increased but not decreased.

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