Question

The ledger of Oriole Company on July 31, 2017, includes the selected accounts below before adjusting entries have been.

Debit Credit
Investment in Note Receivable $22,000
Supplies 22,500
Prepaid Rent 4,200
Buildings 260,000
Accumulated Depreciation-Buildings $120,000
Unearned Service Revenue 10,200

An analysis of the company's accounts shows the following.

1. The investment in the notes receivable earns interest at a rate of 12% per year.

2. Supplies on hand at the end of the month totaled $18,400.

3. The balance in Prepaid Rent represents 4 months of rent costs.

4. Employees were owed $3,500 related to unpaid salaries and wages.

5. Depreciation on buildings is $5,640 per year.

6. During the month, the company satisfied obligations worth $4,850 related to the Unearned Services Revenue.

7. Unpaid maintenance and repair costs were $2,150.

Prepare the adjusting entries at July 31 assuming that adjusting entries are made monthly.

Answer 1

Answer:

July 31                                            Dr.           Cr.

1.  Interest Receivable                 $220

   Interest Income                                        $220

2. Cost of Goods Sold                 $4,100  

   Supplies                                                    $4,100

3. Rent Expense                           $1,050

   Prepaid Rent                                             $1,050

4. Salaries and Wages Expense $3,500

   Salaries and Wages Payable                    $3.500

5. Depreciation                            $470    

   Accumulated Depreciation                       $470

6. Unearned Service Revenue   $4,850

   Serivce Revenue                                       $4,850

7.  Maintainance & repair Exp.    $2,150

    Maintainance & repair Payable               $2,150

Explanation:

1.

Interest Income from Note receivable  = $22,000 x 12% x 1/12 = 220

2.

Reduction in supllies will be adjusted in Cost of Goods Sold by $4,100 ( $22,500 - $18,400 ).

3.

Monthly rent accrues = 4,200 / 4 = $1,050

4.

Unpaid salaried are recorded as the Salaries and Wages Payable of $3,500

5.

Depreciation per month = $5,640 / 12 = $470

6.

Service revenue will b recognized and balance is transferred from unearned revenue to service revenue.

7.

Maintenance and repair costs is recorded as as the maintenance and repair payable by $2,150.