Adjusting Journal Entries Analyze the adjusting transaction statements and prepa
ID: 2478641 • Letter: A
Question
Adjusting Journal Entries
Analyze the adjusting transaction statements and prepare the appropriate adjusting journal entry(s) for MM-Q Watches Incorporated. [Hint: You may need to use your results from "Part 2" to prepare the appropriate adjusting journal entry, for each adjusting transaction statement].
Results:
Debit
Credit
Jan 1 2013
Cash A/c
Dr
$675,000
Land A/c
Dr
$385,000
Warehouse facility A/c
Dr
$465,000
(being business started with cash, purchase of land and warehouse)
$1,525,000
Jan 1 2013
Purchase A/c
Dr
$644,325
To accounts payable A/c
$644,325
(being purchase of 53,250 wrist watches @$12.1per watch)
Mar 1 2013
Cash A/c
Dr
$1,345,500
To sales A/c
$1,345,500
(being sale of 10,350 wrist watches @$130 per watch)
Mar 15 2013
Office equipment A/c
Dr
$90,500
To accounts payable A/c
$90,500
(being office equipment is purchased on credit)
April 30 2013
No entry will be passed for just receiving bill for utility since it does not involve any monetary transactions. Entries are passed for monetary
May 31 2013
Wages A/c
Dr
$171,000
To cash A/c
$171,000
(being wages are paid for 12,000 hours @$14.25 per hour)
June 30 2013
3 years of insurance policy A/c
Dr
$39,660
To cash A/c
$39,660
(being insurance policy purchased)
July 31 2013
Cash A/c
Dr
$2,208,938
To advance received A/c
$2,208,938
(being advance received for 15,750 custom watches from Sun Glass)
Assume that 6 year term loan is received upon the approval
July 31 2013
Cash A/c
$3,150,000
To 6 year term loan A/c
$3,150,000
(being 6 year term loan received)
Oct 31 2013
Advance received A/c
Dr
$1,402,500
To sales A/c
$1,402,500
(being 10,000 wrist watched delivered to Sun Glass
1.) Prepare the necessary entry to account for the insurance used as of Dec ember 31, 2013. Refer to entry(s) "7.)" in Part 2 which is On June 30, 2013 MM-Q Watches Purchased a 3 Year Insurance Policy to Start on June 30, 2012 for $39,660
2.) Prepare the necessary entry to account for the interest incurred as of December 31, 2013 on the loan entered into in entry "9.)" in Part 2 which is On July 31, 2013 MM-Q Watches was approved for a $3,150,000, 6 year term loan, bearing interest of 8.25% per annum. Interest payments are due on each July 31st of the next 6 years.
Debit
Credit
Jan 1 2013
Cash A/c
Dr
$675,000
Land A/c
Dr
$385,000
Warehouse facility A/c
Dr
$465,000
(being business started with cash, purchase of land and warehouse)
$1,525,000
Jan 1 2013
Purchase A/c
Dr
$644,325
To accounts payable A/c
$644,325
(being purchase of 53,250 wrist watches @$12.1per watch)
Mar 1 2013
Cash A/c
Dr
$1,345,500
To sales A/c
$1,345,500
(being sale of 10,350 wrist watches @$130 per watch)
Mar 15 2013
Office equipment A/c
Dr
$90,500
To accounts payable A/c
$90,500
(being office equipment is purchased on credit)
April 30 2013
No entry will be passed for just receiving bill for utility since it does not involve any monetary transactions. Entries are passed for monetary
May 31 2013
Wages A/c
Dr
$171,000
To cash A/c
$171,000
(being wages are paid for 12,000 hours @$14.25 per hour)
June 30 2013
3 years of insurance policy A/c
Dr
$39,660
To cash A/c
$39,660
(being insurance policy purchased)
July 31 2013
Cash A/c
Dr
$2,208,938
To advance received A/c
$2,208,938
(being advance received for 15,750 custom watches from Sun Glass)
Assume that 6 year term loan is received upon the approval
July 31 2013
Cash A/c
$3,150,000
To 6 year term loan A/c
$3,150,000
(being 6 year term loan received)
Oct 31 2013
Advance received A/c
Dr
$1,402,500
To sales A/c
$1,402,500
(being 10,000 wrist watched delivered to Sun Glass
Explanation / Answer
1)
Insurance Expense......................................................Dr. $13220 [$39660/3]
Preapid Insurance.....................................................................Cr. $13220
(insurance expense for the year 2013 expired on Dec 31 recorded)
2)
Interest accrued for 5 months (from Aug 1 to Dec 31) = 8.25% * $3150000 * (5/12) = $108281
Journal:
Interest Expense...........................Dr. $108281
Interest payable.............................................Cr. $108281
(Interest expense for 5 months recorded)
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