Question

Sam Buckley started his own cycle repair shop, Sam's Cycles, on September 1, 2017. Sam wants...

Sam Buckley started his own cycle repair shop, Sam's Cycles, on September 1, 2017. Sam wants to prepare monthly financial statements, so adjusting journal entries are required on September 30. Selected transactions for September follow:

  • 1.$1,100 of supplies were used during the month.
  • 2.Utilities expense incurred but not yet recorded or paid on September 30, 2017, is $775.
  • 3.Paid cash of $2,360 for a one-year insurance policy on September 1, 2017. The policy came into effect on this date.
  • 4.On September 1, purchased repair equipment for $9,600 cash. It is being depreciated over 48 months.
  • 5.On September 1, Sam signs a note payable for $15,000, 4.5% interest.
  • 6.September 30 is a Saturday and employees are paid on Wednesdays for the preceding week. Sam's Cycles has three employees, who are paid $1,000 each for a five-day workweek that ends on Saturday.
  • 7.Invoices representing $950 of services performed have not been recorded as at September 30.

Instructions

Prepare adjusting entries for the items above.

Homework Answers

Answer #1

Adjusting entries

no Account and explanation debit credit
1 Supplies expense 1100
Supplies 1100
(To record supplies used)
2 Utilities expense 775
Utilities payable 775
(To record accrued utilities)
3 Insurance expense (2360/12) 196.67
Prepaid insurance 196.67
(To record insurance expense)
4 Depreciation expense (9600/48) 200
Accumulated depreciation-equipment 200
(To record dep)
5 Interest expense (15000*4.5%*1/12) 56.25
   Interest payable 56.25
(To record interest)
6 Salaries and wages expense 3000
Salaries and wages payable 3000
(To record accrued salaries)
7 Account receivable 950
Service revenue 950
(To record service revenue)
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