CengageNOWv2 Online teaching and learning resource from Cengage Learning Book Ca

Question

CengageNOWv2 Online teaching and learning resource from Cengage Learning Book Calculator Print Item Adjusting Entries Chart of Accounts General Journal Instructions are several transactions of Ardery Company that occurred during the current year and were recorded in permanent (that is, balance sheet) accounts unless indicated otherwise: Date Transaction Purchased a delivery van for $14,000, paying $1,000 down, and issuing a 1-year, 12% note payable for the $13,000 balance. It is estimated that the van has a 4-year life and an $800 residual value;the company uses straight-line depreciation. The interest on the note will be paid on the maturity date Purchased $800 of office supplies Purchased a 2-year comprehensive insurance policy for $1,200 Received 6 months' rent in advance at $250 per month and recorded the $1,500 receipt as Rent Revenue Advanced $600 to sales personnel to cover thoir future travel costs. Accepted a $3,000, 6-month, 12% (annual rate) note recevable from a customer, the interest to be collected when the note is collected Apr. 1 May 15 June 2 Aug. 1 Sept. 15 Nov. 1 The following information also is available Office Suoolies account had a $250 bal $200 of office suoolies on

Explanation / Answer

Journal entries : Date Account titles and explanation Debit Credit Apr 1. Delivery Van 14000 Cash 1000 Notes payable 13000 (Purchase of Delivery Van) May 15. Supplies 800 Cash 800 (Purchase office supplies) June 2. Insurance expense 1200 Prepaid insurance 1200 (Purchased 2 year insurance policy) Aug. 1 Cash 1500 Rent received in advance 1500 (Received rent in advance) Spt 15. Travelling advance 600 Cash 600 (Travel costs paid in advance) Nov 1. Notes receivable 3000 Accounts receivable 3000 (Received a note from customer) Year end adjusting entries: Date Account titles and explanation Debit Credit Dec 31. Depreciation expense 2475 Accumulated depreciation-Delivery Van 2475 [(14000-800)/4]*9/12 (Depreciation for 9 months recorded) Dec 31. Interest expense 1170 Interest payable (13000*12%*9/12) 1170 (Interest due on notes for 9 months) Dec 31. Insurance expense 700 Prepaid insurance (1200*7/12) 700 (Insurance expense for the year-June to Dec) Dec 31. Rent received in advance 1250 Rent revenue (5*250) 1250 (Rent revenue for Aug-Dec recorded) Dec 31. Interest receivable (3000*12%*2/12) 60 Interest income 60 (Interest receivable on notes for 2 months) Dec 31. Supplies expense 850 Supplies (250+800-200) 850 (Supplies used) Dec 31. Salaries and Wages expense 800 Salaries and Wages payable 800 (2000/5)*2 (Wages accrued for 2 days) Dec 31. Travelling expense 500 Travelling advance 500 (Travelling advance used) Dec 31. Income tax expense 255 Income tax payable 255 (Income tax expense due) Note:1-Computation of income tax expense $ $ Pre-tax income before adjustment 8655 Less: Depreciation expense 2475 Interest expense 1170 Insurance expense 700 Supplies expense 850 Salaries and Wages expense 800 Travelling expense 500 6495 2160 Add: Rent revenue 1250 Interest income 60 1310 Income before taxes 850 Tax @ 30% (850*0.3) 255

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