X Company prepares monthly financial statements. The following transactions occu

Question

X Company prepares monthly financial statements. The following transactions occurred during January: On January 1, a one-year store rental lease was signed for a total of $37,200, and rent for the first 3 months was paid in advance. On January 1, equipment was purchased for $50,000 with a downpayment of $10,000 and a note for the remainder. The note along with annual interest of 8% was due in a year. The estimated life of the equipment is 10 years with a salvage value of $6,000. Daily wages are $1,700 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:

9. The required adjusting entries on January 31 decreased total assets by a total of:

Explanation / Answer

8. The required adjusting entries on January 31 decreased net income by a total of $ 16,433.34

9. The required adjusting entries on January 31 decreased total assets by a total of $12,767.

Adjusting Entries:

Adjustment Account Titles Debit Credit $ $ a. Rent Expense ( 37,200 / 3) 12,400 Prepaid Rent 12,400 b. Interest Expense ( 40,000 x 8%) / 12 266.67 Interest Payable 266.67 c. Depreciation Expense ( 50,000 - 6,000) / (10x12) 366.67 Accumulated Depreciation : Equipment 366.67 d. Wages Expense ( 1,700 x2) 3,400 Wages Payable 3,400

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