X Company prepares monthly financial statements. The following transactions occu

Question

X Company prepares monthly financial statements. The following transactions occurred during January 1. On January 1, a one-year store rental lease was signed for a total of $31,200, and rent for the first 3 months was paid in advance. 2. On January 1, equipment was purchased for $55,000 with a downpayment of $11,000 and a note for the remainder. The note along with annual interest of 7% was due in a year. The estimated life of the equipment is 10 years with a salvage value of $6,000 3. Daily wages are $1,100 and are paid every Friday. The last day in January was a Monday. 8. The required adjusting entries on January 31 decreased net income by a total of Submit Answer Tries 0/3 9. The required adjusting entries on January 31 decreased total assets by a total of Submit Answer Tries 0/3

Explanation / Answer

first let us prepare the required adjusting entries:

now<

8. The required adjusting entries decreased net income by a total of $4,365

(rent expense + depreciation expense + interest expense + wages expense =>2600 +408.33+256.67+1100=>$4,365)

9.The required adjusting entries decrease total assets by total of $3,008.33.

(prepaid rent reduced by $2600 and book value of asset reduced by the amount of depreciation of $408.33

=>2600 + 408.33 =>$3,008.33.)

January 31 Rent expense a/c $2600 ..............To Prepaid rent a/c $2600 (being rent expense @$31,200 / 12 =>$2600,charrged out of rent prepaid on january 1) Jan 31 Depreciation expense a/c $408.33 ..........To Accumulated depreciation a/c $408.33 (depreciation = ($55,000 - 6,000) /10 * 1/12 =>$408.33) jan 31 Interest expense a/c $256.67 .................To Interest on notes payble a/c . $256.67. (being interest on notes = ($55,000 - $11,000) * 7% * 1/12 =>$256.67) Jan 31 Wages expense a/c $1,100 ..............To Wages payable a/c $1,100 (being wages payable for the last day of month, which is a monday)

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