Question

Andy Roddick is the new owner of Ace Computer Services. At the end of August 2014, his first month of ownership, Roddick is trying to prepare monthly financial statements. Below is some information related to unrecorded expenses that the business incurred during August.
(a) At August 31, Roddick owed his employees $3,247 in salaries and wages that will be paid on September 1.
(b) At the end of the month, he had not yet received the month's utility bill. Based on past experience, he estimated the bill would be approximately $761.
(c) On August 1, Roddick borrowed $48,000 from a local bank on a 15-year mortgage. The annual interest rate is 8%.
(d) A telephone bill in the amount of $134 covering August charges is unpaid at August 31.
Prepare the adjusting journal entries as of August 31, 2014, suggested by the information above. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Answer 1

Answer:

A)

wages expense 3,247 debit

      wages payable   3,247 credit

b) utilities expense 761 debit

     utilities payable          761 credit

c) interest expense 320 debit

     interest payable         320 credit

d) telephone expense 134 debit

     telephone payable        134 credit

Explanation:

a) we recognize the expense and we also need to disclosure the obligation to pay this expenses in the near future.

b) we must place the expense in the period it was generated, which is August.

c) principal x rate x time = interest

rate and tiem must be expressed atthe same metric

8% annual  --> 12 months

we need interest for 1 month so 0.08/12 = 0.0066667

48,000 x 0.08 / 12 = 320

d) same as b we adjust to a associate the expense with the period it occur.

Answer 2

The  adjusting journal entries as of August 31, 2014 are :

1 . Dr Salaries and Wages Expense $3,247

Cr Salaries and Wages Payable $3,247

(To record Salaries and Wages Expense)

2. Dr  Utilities Expenses $761

Cr Accounts Payable $761

(To record Utilities Expenses)

3. Dr  Interest Expense $320

Cr  Interest Payable $320

($48,000×8%/12)

(To record Interest Expense)

4. Dr  Telephone and Internet Expense $134

Cr   Accounts Payable $134

(To record unpaid Telephone expense)

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