Financial Act Demonstration Problem #3

Since no adjusting entries were made in january we

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Unformatted text preview: sting entries were made in January, we need to show that the asset (prepaid rent) has now been used and an expense has been incurred. Journal entry: Debit to Rent Expense and Credit to Prepaid Rent Dr. 800 Feb 28 Rent Expense Prepaid rent Cr. 800 B. Analysis: Office supplies were purchased in January for $150. Since no adjustments have been made since that time, we need to recognize the amount of office supplies that have been "used up", thus incurring and expense. Journal entry: Debit to Supplies Expense and Credit to Office Supplies. Office Supplies 1/5 150 125 EB Feb 28 Supplies Expense Office Supplies C. 25 Dr. 125 Cr. 125 Analysis: Depreciation for property, plant and equipment is being charged evenly throughout the two years. Since there is no salvage value, then estimated salvage value per month (over 2 years) would be $ 1500/24 months = $62.50 per month. No depreciation has been recorded for January or February. For leasehold improvements, you estimate $3,000/24 months = $125.00 per month....
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