Questions 8 and 9 refer to the following information: X Company prepares monthly

Question

Questions 8 and 9 refer to the following information: 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 $33,600, and rent for the first 2 months was paid in advance. 2. On January 1, equipment was purchased for $55,000 with a downpayment of $5,500 and a note for the remainder. The note along with annual interest of 896 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 $1,600 and are paid every Friday. The last day in January was a Tuesday 8. The required adjusting entries on January 31 decreased net income by a total of Submit Answor Tries 0/3 9. The required adjusting entries on January 31 decreased total assets by a total of Submit Anewer Tries 0/3

Explanation / Answer

1) The rent for one year is =33600/12=2800 and it is expense in income statement

2) the loan amount=55000-5500=49500 and the interest rate is 8% for year so monthly interest expense is

=49500*(8%/12)=330

3)for 4 days the wage is pending and it is =1600*4=6400

total net income decrease by=2800+330+6400=9530

9) the prepaid asset decrease by 2800

no decrease in notes receivable

No effect on the assets

so total decrease is by only 2800

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