Reference no: EM132479031
assume that adjusting entries and financial statements are prepared annually at the end of the calendar year.
Question 1. On November 1, 2018, Alf Company borrowed $100,000 at 12% to be paid back with interest on May 1, 2019. Prepare the journal entries for:
(a) November 1, 2018
(b) December 31, 2018
(c) May 1, 2019
Check figures:
(b) Interest Payable (cr), $2,000
(c) Entry includes 3 debits and a credit to Cash for $106,000
- How much interest expense is reported on the 2018 income statement? On the 2019 income statement?
- How much cash is paid for interest in 2018? In 2019?
Question 2. On September 1, 2018, Smithson Rental Agency received $600 from a client for general services to be rendered by the agency over a 6-month period beginning that date. The receipt of this money was recorded as a credit to Unearned Revenue. Except for the initial recording, no further entries have been made as of December 31. The agency has performed services per the agreement. Prepare the journal entries for:
(a) September 1, 2018
(b) December 31, 2018
Check figures:
(a) Unearned Revenue (cr), $600
(b) Unearned Revenue (dr), $400
- How much service revenue is reported in 2018? In 2019?
Question 3. On Friday of each week, Lake Company pays its sales personnel weekly salaries amounting to $60,000 for a five day work week.
(a) Record the journal entry to record the payment of a week's salaries on the last Friday of the year.
(b) Record the necessary adjusting entry at year-end, assuming that December 31 falls on a Wednesday.
(c) Record the journal entry for the payment by Lake Company of a week's salaries to its sales personnel on Friday January 2, the first payday of the new year.
Check figures:
(b) Salaries payable, (cr), $36,000
(c) Entry includes 2 debits and a credit to Cash for $60,000
Question 4. Armor Company has a one-month accounting period. Journal entries were made in the month of June to record the following:
(a) Payment of a previously recorded liability.
(b) Issuance (for cash) of shares of Armor's common stock
(c) Depreciation expense for the month.
(d) Revenue earned during the month which has not yet been billed to customers.
(e) Unearned revenue that was earned in June. (The unearned revenue account was credited when the advance payment was received.)
(f) Salaries payable to company personnel which have accrued since the last payday in June.
- Indicate the effect of each of the entries on the major elements of the company's financial statements (revenues, expenses, net income, assets, liabilities, and owner's equity). Use + for increase, - for decrease, and NE for no effect.
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