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 $28,800, and rent for the first 2 months was paid in advance. 2. On January 1, equipment was purchased for $55,000 with a downpayment of $11,000 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 3. Daily wages are $1,900 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 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

Answer

Working

Income

Asset

Date

Journal

Dr

Cr

Effect

Amount

Effect

Amount

[2 months rent paid]

Asset (prepaid)

4800

Asset (Cash)

4800

31-Jan

[1 month rent adjusted]

Expense (Rent)

2400

Decrease by

2400

Asset (prepaid)

2400

Decrease by

2400

[asset purchased]

Asset

55000

Asset

11000

Liab

44000

31-Jan

[1 month interest @7%]

Expense(interest)

256.67

Decrease by

256.67

[44000x7%x1/12]

Liab (int payable)

256.67

31-Jan

[1 month depreciation]

Expense (Depreciation)

408.33

Decrease by

408.33

[55000-6000/10]x1/12

Asset (Acc.Dep)

408.33

Decrease by

408.33

31-Jan

[4 day wages due]

Expense(Wages)

7600

Decrease by

7600

[Sat,Sun,Mon,Tues - 1900 x 4]

Liab (Wages payable)

7600

TOTAL

Decrease by

10665

Decrease by

2808.33

Working

Income

Asset

Date

Journal

Dr

Cr

Effect

Amount

Effect

Amount

[2 months rent paid]

Asset (prepaid)

4800

Asset (Cash)

4800

31-Jan

[1 month rent adjusted]

Expense (Rent)

2400

Decrease by

2400

Asset (prepaid)

2400

Decrease by

2400

[asset purchased]

Asset

55000

Asset

11000

Liab

44000

31-Jan

[1 month interest @7%]

Expense(interest)

256.67

Decrease by

256.67

[44000x7%x1/12]

Liab (int payable)

256.67

31-Jan

[1 month depreciation]

Expense (Depreciation)

408.33

Decrease by

408.33

[55000-6000/10]x1/12

Asset (Acc.Dep)

408.33

Decrease by

408.33

31-Jan

[4 day wages due]

Expense(Wages)

7600

Decrease by

7600

[Sat,Sun,Mon,Tues - 1900 x 4]

Liab (Wages payable)

7600

TOTAL

Decrease by

10665

Decrease by

2808.33

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