HW #1 Solution

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

This preview shows pages 1–2. Sign up to view the full content.

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

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

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...
View Full Document

{[ snackBarMessage ]}

### Page1 / 2

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

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online