Answered

Prepare the adjusting entries at July 31, 2022, assuming that adjusting entries are made monthly.

Selected accounts before adjusting entries:

| Account | Debit | Credit |
|---|---|---|
| Investment in Note Receivable | [tex]$20,000 | |
| Supplies | $[/tex]24,000 | |
| Prepaid Rent | [tex]$3,600 | |
| Buildings | $[/tex]250,000 | |
| Accumulated Depreciation-Buildings | | [tex]$140,000 |
| Unearned Service Revenue | | $[/tex]11,500 |

Analysis of accounts:

1. The investment in the notes receivable earns interest at a rate of 6% per year.
2. Supplies on hand at the end of the month totaled [tex]$18,600.
3. The balance in Prepaid Rent represents 4 months of rent costs.
4. Employees were owed $[/tex]3,100 related to unpaid salaries and wages.
5. Depreciation on buildings is [tex]$6,000 per year.
6. During the month, the company satisfied obligations worth $[/tex]4,700 related to the Unearned Service Revenue.
7. Unpaid maintenance and repairs costs were $2,300.

Prepare the adjusting entries for July 31.

(If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)



Answer :

GinnyAnswer
Certainly! Here’s a detailed, step-by-step solution for the adjusting entries required for Armour Lake Lumber Supply on July 31, 2022:

1. Interest Earned on Note Receivable:
- The investment in note receivable earns interest at a rate of 6% per year.
- For one month, the interest earned can be calculated as: [tex]\(\frac{\$20,000 \times 0.06}{12} = \$100\)[/tex]
- Adjusting entry:
- Interest Receivable: \[tex]$100 - Interest Revenue: \$[/tex]100

2. Supplies Used:
- Supplies at the beginning were \[tex]$24,000 and at the end of the month were \$[/tex]18,600.
- Supplies used: [tex]\(\$24,000 - \$18,600 = \$5,400\)[/tex]
- Adjusting entry:
- Supplies Expense: \[tex]$5,400 - Supplies: \(-\$[/tex]5,400\)

3. Prepaid Rent Expense:
- Prepaid rent represents 4 months of rent costs: \[tex]$3,600. - Monthly rent expense: \(\frac{\$[/tex]3,600}{4} = \[tex]$900\) - Adjusting entry: - Rent Expense: \$[/tex]900
- Prepaid Rent: [tex]\(-\$900\)[/tex]

4. Unpaid Salaries and Wages:
- Employees were owed \[tex]$3,100 related to unpaid salaries and wages. - Adjusting entry: - Salaries and Wages Expense: \$[/tex]3,100
- Salaries and Wages Payable: \[tex]$3,100 5. Depreciation Expense on Buildings: - Annual depreciation is \$[/tex]6,000. Monthly depreciation expense: [tex]\(\frac{\$6,000}{12} = \$500\)[/tex]
- Adjusting entry:
- Depreciation Expense: \[tex]$500 - Accumulated Depreciation-Buildings: \$[/tex]500

6. Unearned Service Revenue:
- The company satisfied obligations worth \[tex]$4,700 during the month. - Adjusting entry: - Unearned Service Revenue: \(-\$[/tex]4,700\)
- Service Revenue: \[tex]$4,700 7. Unpaid Maintenance and Repairs Costs: - Unpaid maintenance and repairs costs were \$[/tex]2,300.
- Adjusting entry:
- Maintenance and Repairs Expense: \[tex]$2,300 - Accounts Payable: \$[/tex]2,300

The summary of adjusting entries at July 31 is as follows:

1. Interest Receivable: [tex]\(\$100\)[/tex]
- Debit: Interest Receivable: \[tex]$100 - Credit: Interest Revenue: \$[/tex]100

2. Supplies Expense: [tex]\(\$5,400\)[/tex]
- Debit: Supplies Expense: \[tex]$5,400 - Credit: Supplies: \(-\$[/tex]5,400\)

3. Rent Expense: [tex]\(\$900\)[/tex]
- Debit: Rent Expense: \[tex]$900 - Credit: Prepaid Rent: \(-\$[/tex]900\)

4. Salaries and Wages Expense: [tex]\(\$3,100\)[/tex]
- Debit: Salaries and Wages Expense: \[tex]$3,100 - Credit: Salaries and Wages Payable: \$[/tex]3,100

5. Depreciation Expense: [tex]\(\$500\)[/tex]
- Debit: Depreciation Expense: \[tex]$500 - Credit: Accumulated Depreciation-Buildings: \$[/tex]500

6. Unearned Service Revenue: [tex]\(\$4,700\)[/tex]
- Debit: Unearned Service Revenue: [tex]\(-\$4,700\)[/tex]
- Credit: Service Revenue: \[tex]$4,700 7. Maintenance and Repairs Expense: \(\$[/tex]2,300\)
- Debit: Maintenance and Repairs Expense: \[tex]$2,300 - Credit: Accounts Payable: \$[/tex]2,300

These adjusting entries ensure that the financial records accurately reflect the income and expenses for the month of July 2022.

Other Questions