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.
