in the first year of operations Lien company entered into the following transact
ID: 2525865 • Letter: I
Question
in the first year of operations Lien company entered into the following transactions among others:
a 1 january bought equipment 105000.
b 31 march prepaid one years rent 24000.
c 1 July took out a one year loan from the bank at an annual interest rate of 8 percent 20000.
d 1 August received payment for services not yet rendered 12000.
on 31 December lien has earned 8000 of the 12000 in transaction 4 and has incurred but not recorded 450 of electricity. lien prepares adjusting entries on an annual basis.
question: prepare journal entries for transactions a and d. prepare any adjusting journal entries needed at 31 December. assume that the equipment depreciates 15000 annually.
Explanation / Answer
REQ1: JOURNAL ENTRIES DATE ACCOUNTS TITLE AND EXPLANATION DEBIT $ CREDIT $ 1-Jan Equipment Dr. 105000 Cash Account 105000 31-Mar Prepaid rent Dr. 24000 Cash Account 24000 1-Jul Cash Account Dr. 20000 Bank loan payable 20000 1-Aug Cash Account Dr, 12000 Unearned service revenue 12000 ADJUSTING ENTRIES DATE ACCOUNTS TITLE AND EXPLANATION DEBIT $ CREDIT $ 31-Dec Depreciation expense Dr. 15000 Accumulated depreciation-Equipment 15000 31-Dec Rent expense Account Dr. (24000/12*9) 18000 Prepaid rent Account 18000 31-Dec Interest expense Dr. 800 Interest payable (20000*8%*6/12) 800 31-Dec Unearned revenue Account Dr. 8000 Service revenue 8000 31-Dec Utilities expense Dr. 450 Utilities payable Account 450
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