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3 March, 09:38

On June 1, 2019, Cain Company, a new firm, paid $8,400 rent in advance for a seven-month period. The $8,400 was debited to the Prepaid Rent account. On June 1, 2019, the firm bought supplies for $10,250. The $10,250 was debited to the Supplies account. An inventory of supplies at the end of June showed that items costing $5,960 were on hand. On June 1, 2019, the firm bought equipment costing $72,900. The equipment has an expected useful life of 9 years and no salvage value. The firm will use the straight-line method of depreciation. Prepare end-of-June adjusting entries for Cain Company.

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  1. 3 March, 10:56
    0
    Cain Company

    Adjusting entries

    June 30 2019

    1. To record rental expense during June 2019

    Rent Expenses Debit $ 1,200

    Prepaid Rent Credit $ 1.200

    2. To record supplies consumed during June 2019

    Supplies Expenses / Consumed Debit $ 4,290

    Supplies Credit $ 4,290

    3. To record depreciation expenses for June 2019

    Depreciation expenses Debit $ 675

    Allowance for depreciation Credit $ 675

    Explanation:

    Computation of values for adjusting entries

    Rent Expense

    Rental paid in advance $ 8,400

    Period of benefit 7 months

    Monthly cost $ 8,400 / 7 $ 1,200

    Supplies expense

    Purchase of supplies $ 10.250

    Ending inventory of supplies $ 5,960

    Supplies consumed $ 4,290

    Depreciation expenses

    Cost of equipment $ 72,900

    Estimated useful Life 9 years

    Annual depreciation $ 72,900/9 $ 8,100

    Depreciation expense for 1 month $ 675
  2. 3 March, 12:05
    0
    Paid $8,400 rent in advance for a seven-month period.

    Rent Account $8,400 (debit)

    Profit and Loss $ 8,400 (credit)

    An inventory of supplies at the end of June showed that items costing $5,960 were on hand.

    Inventory $5,960 (debit)

    Profit and Loss $ 5,960 (credit)

    The firm bought equipment costing $72,900. The equipment has an expected useful life of 9 years and no salvage value.

    Purchase of Equipment

    Equipment $72,900 (debit)

    Cash $72,900 (credit)

    Depreciation on Equipment

    Depreciation expense $ 675 (debit)

    Accumulated for Depreciation $ 675 (credit)

    Explanation:

    Paid $8,400 rent in advance for a seven-month period.

    Adjust the Rent Expense Account and the Profit and Loss Account

    An inventory of supplies at the end of June showed that items costing $5,960 were on hand.

    Recognise amounts to inventory and Post to Profit and Loss

    The firm bought equipment costing $72,900. The equipment has an expected useful life of 9 years and no salvage value.

    Purchase of Equipment

    Equipment $72,900 (debit)

    Cash $72,900 (credit)

    Depreciation on Equipment

    Depreciation expense $ 675 (debit)

    Accumulated for Depreciation $ 675 (credit)

    Depreciation = (Cost-Salvage Value) / Useful Life

    = ($72,900 - 0) / 9

    = $ 8100

    June Depreciation = $ 8100*1/12

    = $ 675
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