X Company prepares monthly financial statements. The following transactions occu

Question

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 $31,200, 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 $5,000 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 $4,000. 3. Daily wages are $1,700 and are paid every Friday. The last day in January was a Monday. 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

Explanation / Answer

8. The required adjusting entries on January 31 decreased net income by a total of:

Decrease in income = One month lease rent + One month depreciation - One month interest on note + 31 days wages of january

.................................= ($31,200 / 12) + {[($50,000 - $4,000) / 10 years] / 12 months} + [($45,000 x 8%) / 12] + ($1,700 x 31 days)

.................................= $2,600 + $383 + $300 + $52,700

.................................= $58,983

9. The required adjusting entries on January 31 decreased total assets by a total of:

Decrease in total assets = One month lease payment - Purchase machine + Downpayment + One month depreciation

.......................................= ($31,200 / 12) - $50,000 + $5,000 + {[($50,000 - $4,000) / 10 years] / 12 months}

.......................................= $2,600 - $50,000 + $5,000 + $383

.......................................= ($42,017)

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