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11 January, 10:29

Exercise (2):

Javier Computer Services began operations in July 2017. At the end of the month, the company prepares monthly financial statements. It has the following information for the month.

1. At July 31, the company owed employees $1,300 in salaries that the company will pay in August.

2. On July 1, the company borrowed $20,000 from a local bank on a 10-year note. The annual interest rate is 12%.

3. Service revenue unrecorded in July totaled $2,400.

Required:

Prepare the adjusting entries needed at July 31, 2017.

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Answers (1)
  1. 11 January, 12:32
    0
    Amount in $

    Dr. Cr.

    Salaries Expense 1,300

    Salaries Payable 1,300

    Salaries to be paid in august

    Bank 20,000

    Long term loan 20,000

    Loan received from bank on a 10 year note

    Interest Expense 200

    Interest payable 200

    Expense on loan for 10 years (20,000 *.12*1/12)

    Revenue 2,400

    Receivable 2,400

    Unrecorded revenue

    Explanation:

    1. Salaries are payable in august so a payable will be recorded for the amount. and an expense will be booked for the month.

    2. Since this loan is for a period of more than 12 months so it will be treated as long term and interest on it will be calculated as mentioned above.

    3. Unrecorded revenue will be recorded at mentioned above.
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