Flood Relief Inc. prepares monthly financial statements and therefor re adjusts
ID: 2537397 • Letter: F
Question
Flood Relief Inc. prepares monthly financial statements and therefor re adjusts its accounts at the end of every month. The following inforrnation is available for June 2017: Required: 1. For each of the following situations, identify and analyze the adjustment necessary on June 30, 2017. Do not round intermediate calculations. If required, round your final answers to the nearest dollar. a. Flood received $10,000, 496, two-year note receivable from a customer for time. Assume a 360-day year Activity Accounts Statement(s) services rendered. The principal and interest are due on June 1, 2019. Flood expects to be able to collect the note and interest in full at that principal and interest ar How does this entry affect the accounting equation? al statement item is not affected, select No Entry and leave the amount box blank. If the effect on a financial statement item is negative, ie, a decrease, be sure to enter the answer with a minus sign. Balance Sheet Income Statement Stockholders Net Assets Liabilities +Equity - Income b. Office supplies totaling $5,600 were purchased during the month. The asset account Supplies is increased whenever a purchase is made. A count in the storeroom on June 30, 2017, indicates that amount to $507. The supplies on hand at the beginning of the month total $475. Activity Accounts Statement(s) on hand How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Income Statement Previous NextExplanation / Answer
a.)
So, when the note is received the entry would be
Notes receivable A/c Dr $10,000
To Customer A/c $10,000
[Which means no change in financial statement position, as one current asset (customer debtor) is being transformed into another current asset(notes receivable)]
and at the year end or month end, to record the interest income of the period,
Interest receivable A/c Dr $ 33.33
To Interest Income A/c $33.33
[So, asset increases in current asset ( interest receivable) and income and net income in income statement (interest income) and hence equity increases in the form of retained earnings]
b.)
Asset increases by 507 - 475 = $32
Expenses in income statement = $5,632
Net income decreases and so does equity
c.)
Current Asset of cash is transformed to Fixed Asset machine. No change
Annual Depreciation, (170,000 - 2000)/4 = $42,000 and monthly, $3,500
Depreciation A/c Dr $3500
To Asset A/c $3500
So,
Asset decreases, expense increases, net income decreases, equity decreases
d.)
Rent A/c Dr $1,550
Prepaid Rent A/c Dr $3,100
To Cash A/c $4,650
Expense increases by 1550, net income decreases by 1550, equity decreases by 1550 and asset decreases by 1550
e.)
Wages A/c Dr $5,000
To Wages payable A/c $5,000
Expenses increase by 5000, Net income decreases by 5000, Liabilities increase by 5000, Equity decreases by 5000
f.)
Income taxes A/c Dr $2,950
To Income Taxes Payable A/c $2,950
Expenses increases by 2950, Net income decreases by 2950, Liabilities increase by 2950, Equity decreases by 2950
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