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 $43,200, and rent for the first 4 months was paid in advance. n January 1, equipment was purchased for 550,000 with a downpayment of $10,000 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 with a salvage value of $4,000. 3. Daily wages are $1,100 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 Answer Tries 0/3 9. The required adjusting entries on January 31 decreased total assets by a total of Submit Anawer Tries 0/3

Explanation / Answer

8. Net Income Decreased on January 31:

Working Notes:

1.Calculation of Depreciation:

                                       ($50000-$4000)/10=$4600 p.a.

Depreciation for the month of january=     $4600/12= $383.33

2.Calculation of Interest:

Interest on Equipment:                  $40000*7%= $2800 p.a.

Interest for the month of january =    $2800/12 = $233.33

9. Total assets Decreased on January 31:

Working Notes:3-

Decreased in cash:

Lease Rent ($3600*4)             =   $14400

Daily Wages ($1100*4)            =   $4400

Downpayment                          = $10000

Total                                        = $28800

Particular Amount Lease Rent $3600.00 Depreciation $383.33 Interest $233.33 Daily Wages $4400.00 Total Net Income Decreased $8616.67

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