X Company prepares monthly financial statements. The following transactions occu
ID: 2599416 • Letter: X
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 $44,400, and rent for the first 3 months was paid in advance.
2. 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 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 $1,300 and are paid every Friday. The last day in January was a Monday.
QUESTION:
The required adjusting entries on January 31 decreased net income by a total of______
Explanation / Answer
Expenses incurred in January:
Lease rental = 44400/12 = 3700
Interest accrued on equipment = (60000-6000)*8%*1/12 = 360
Depreciation expense = (60000 - 4000)/10 *1/12 = 56000/10 *1/12 = 5600/12 = 466.66
Daily wage expenses = 1300*31 = 40300
Decrease in net income = 3700+360+466.66+40300 = 44826.66
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