HW #1 Solution

HW #1 Solution - $500 Interest Payable $500 b) Prepare the...

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ACCT 401 Homework #1 Reminder: This will be graded for accuracy. Each adjusting entry will count 1 point. There will be no partial credit. Your work must be easily read so please write clearly. 1. ABC Co. purchased equipment for a cost of $12,000 on 3/31/1. There was a $2,000 salvage and a four year life. Prepare the adjusting entry for the year end of 12/31/1. (12,000 – 2,000)/4 = $2,500 $2,500*9/12 months = $1,875 Depreciation Expense $1,875 Accumulated Depreciation $1,875 2. DEF Co. purchased 1 year of insurance on 1/1/1 for $12,000 and set it up as a prepayment. Prepare the adjusting entry for the year end of 6/30/1. 12,000*6/12 months = $6,000 Insurance Expense $6,000 Prepaid Insurance $6,000 3. EFG Co. borrowed $50,000 at 6% on 11/1/1 for 6 months. a) Prepare the adjusting entry for 12/31/1. Interest Expense for Nov.-Dec.: $50,000*.06*2/12 months = $500 (Remember, interest rates are always stated on an annual basis) Interest Expense
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Unformatted text preview: $500 Interest Payable $500 b) Prepare the journal entry to record the payment at maturity. Interest Expense for Jan.-Apr.: $50,000*.06*4/12 = $1,000 Note Payable $50,000 Interest Expense $1,000 Interest Payable $500 Cash $51,500 4. Your payroll is paid each Friday. The weekly payroll should be $5,000 each week (for a 5 day work week). a) Prepare the adjusting entry if the year ends on Tuesday, December 31. $1,000 per day * 2 days worked (Mon-Tues) = $2,000 Salary Expense $2,000 Salary Payable $2,000 b) Prepare the entry to record the payroll on Friday, January 3. $1,000 per day * 3 remaining days (Wed-Fri) = $3,000 Salary Expense $3,000 Salary Payable $2,000 Cash $5,000 5. As an attorney, you ask a client for a $50,000 retainer in advance. At year-end, you have earned 30% of the fee. Prepare the 12/31 adjusting entry. $50,000*.30 = $15,000 Unearned Revenue $15,000 Service Revenue $15,000...
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HW #1 Solution - $500 Interest Payable $500 b) Prepare the...

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