Flood Relief Inc. prepares monthly financial statements and therefore adjusts it
ID: 2390526 • Letter: F
Question
Flood Relief Inc. prepares monthly financial statements and therefore adjusts its accounts at the end of every month. The following information is available for June 2016:
Required:
a. Flood received a $10,000, 4%, two-year note receivable from a customer for services rendered. The principal and interest are due on June 1, 2018. Flood expects to be able to collect the note and interest in full at that time. b. Office supplies totaling $5,600 were purchased during the month. The asset account Supplies is debited whenever a purchase is made. A count in the storeroom on June 30, 2016, indicates that supplies on hand amount to $507. The supplies on hand at the beginning of the month total $475. c. The company purchased machines last year for $170,000. The machines are expected to be used for four years and have an estimated salvage value of $2,000. d. On June 1, the company paid $4,650 for rent for June, July, and August. The asset Prepaid Rent was debited; it did not have a balance on June 1. e. The company operates seven days per week with a weekly payroll of $7,000. Wage earners are paid every Sunday. The last day of the month is Thursday, June 30. f. Based on its income for the month, Flood estimates that federal income taxes for June amount to $2,900.Explanation / Answer
Date General Journal Debit Credit Jun. 30, 2016 a. Interest receivable 33.33 Interest revenue ($10000 x 4% x 1/12) 33.33 (To record interest accrued on note receivable) b. Supplies expense 5568 Supplies ($475 + $5600 - $507) 5568 (To record supplies used) c. Depreciation expense [($170000 - $2000) x 1/48] 3500 Accumulated depreciation 3500 (To record depreciation on machines) d. Rent expense ($4650 x 1/3) 1550 Prepaid rent 1550 (To record rent expired) e. Salaries and wages expense ($7000 x 4/7) 4000 Salaries and wages payable 4000 (To record unpaid salaries and wages) f. Income tax expense 2900 Income tax payable 2900 (To record income tax accrued)
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