Question

Flood Relief Inc. prepares monthly financial statements and therefore adjusts its accounts at the end of every month. The following information is available for June 2016:

a.	Flood received a $10,000, 4%, two-year note receivable from a customer for services rendered. The principal and interest are due on June 1, 2018. Flood expects to be able to collect the note and interest in full at that time.
b.	Office supplies totaling $5,600 were purchased during the month. The asset account Supplies is debited whenever a purchase is made. A count in the storeroom on June 30, 2016, indicates that supplies on hand amount to $507. The supplies on hand at the beginning of the month total $475.
c.	The company purchased machines last year for $170,000. The machines are expected to be used for four years and have an estimated salvage value of $2,000.
d.	On June 1, the company paid $4,650 for rent for June, July, and August. The asset Prepaid Rent was debited; it did not have a balance on June 1.
e.	The company operates seven days per week with a weekly payroll of $7,000. Wage earners are paid every Sunday. The last day of the month is Thursday, June 30.
f.	Based on its income for the month, Flood estimates that federal income taxes for June amount to $2,900.

Required:

For each of the preceding situations, prepare in general journal form the appropriate adjusting entry to be recorded on June 30, 2016.

Answer 1

Date	General Journal	Debit	Credit
Jun. 30, 2016
a.	Interest receivable	33.33
	Interest revenue ($10000 x 4% x 1/12)		33.33
	(To record interest accrued on note receivable)
b.	Supplies expense	5568
	Supplies ($475 + $5600 - $507)		5568
	(To record supplies used)
c.	Depreciation expense [($170000 - $2000) x 1/48]	3500
	Accumulated depreciation		3500
	(To record depreciation on machines)
d.	Rent expense ($4650 x 1/3)	1550
	Prepaid rent		1550
	(To record rent expired)
e.	Salaries and wages expense ($7000 x 4/7)	4000
	Salaries and wages payable		4000
	(To record unpaid salaries and wages)
f.	Income tax expense	2900
	Income tax payable		2900
	(To record income tax accrued)