Question

1)Bailey Corporation, prepares the following adjustments required at the end of the month on July 31: Before these adjustments, Bailey had assets of $70,000, Liabilities of $50,000 and Stockholders’ equity of $20,000. Here are the adjustments made:

a. Sent a $795 bill to a customer for services for services provided. The customer will paid in August.

b. Owed wages to 3 employees who worked five days at $83 each per day at the end of July. The company will pay employees at the end of the first week of August.

c. On July 1, loaned money to an employee who agreed to repay the loan in one year along with $3,120 for one full year of interest. No interest has been recorded yet.

After the adjustments, assets on 7/31 will be $________

2)Assume Bella Donna’s General Store bought, on credit, a truckload of merchandise from American Wholesaling costing $3,960. The company paid $170 in transportation cost to National Trucking to deliver the merchandise to Bella Donna. Bella Donna immediately returned goods to American Wholesaling costing $690, and then took advantage of American Wholesaling’s 1/10, n/30 purchase discount.

When Bella Donna pays American Wholesale within the discount period, the credit to cash will be $______.

Merchandise costing $644 is sold for $1,260 on terms 2/10, n/30. If the buyer pays within the discount period, When recording the sale the debit to Accounts Receivable will be $____

Answer 1

Adjusting entries
Event	Account title	Debit	Credit
a	Account receivable	$           795
	Service revenue		$           795
	(To record service revenue on account.)
b	Wages expense	$        1,245
	Wages payable		$        1,245
	(To record wages expense this paid in future.) (3*5*83)
c	Interest receivable	$           260
	Interest revenue		$           260
	(To record accrued interest revenue.) (3120*1/12)

Event	Assets	=	Liabilities	+	Stockholders’ equity
Beg. Bal.	$        70,000	=	$        50,000	+	$        20,000
a	$              795	=		+	$              795
b		=	$          1,245	+	$        (1,245)
c	$              260	=		+	$              260
End. Bal.	$        71,055	=	$        51,245	+	$        19,810
After the adjustments, assets on 7/31 will be					$        71,055

Journal entries
Event	Account title	Debit	Credit
a	Merchandise inventory	$ 3,960.00
	Accounts payable		$ 3,960.00
	(To record purchased of inventory on account)
b	Merchandise inventory	$     170.00
	Cash		$     170.00
	(To record fright paid for inventory purchase)
c	Accounts payable	$     690.00
	Merchandise inventory		$     690.00
	(To record goods returned to suppliers)
d	Accounts payable	$ 3,270.00
	Merchandise inventory (3270*1%)		$        32.70
	Cash (3270-(3270*1%))		$ 3,237.30
	(To record cash paid to supplier.) (net purchase on account = 3960-690)
When Bella Donna pays American Wholesale within the discount period, the credit to cash will be			$ 3,237.30

Journal entries
Event	Account title	Debit	Credit
	Accounts receivable	$        1,260
	Sales revenue		$        1,260
	(To record sales revenue on account.)
Merchandise costing $644 is sold for $1,260 on terms 2/10, n/30. If the buyer pays within the discount period, When recording the sale the debit to Accounts Receivable will be			$        1,260