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

Explanation / Answer

Particulars Amount Decrease in Net Income by lease rent($44,400 / 12) $3,700 Decrease in Net Income by Depreciation [($60,000 - $6,000) / (10x12)] $450 Decrease in Net Income by NotePayable ($54,000 x 7%) / 12 $315 Decrease in Net Income by Daily Wages ($1,700 x 31 days) $52,700 Total Decrease in Net Income $57,165

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