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Question 2 Scranton Motors Ltd faced the following situations.     The business has interest expense of...

Question 2

Scranton Motors Ltd faced the following situations.

  •     The business has interest expense of $9,000 early in January 2017.
  •     Interest revenue of $2,000 has been earned but not yet received.
  •     When the business collected $12,000 in advance three months ago, the accountant debited

Cash and credited Unearned Revenue. The client was paying for two cars, one delivered in

December, the other to be delivered in February 2017.

  •     Salary expense is $500 per day – Monday through Friday – and the business pays employees

each Friday. For example, purposes, assume that this year, December 31 falls on a Tuesday.

  •     The unadjusted balance of the Supplies account is $2,100. The total cost of supplies on hand is

$800.

  •     Equipment was purchased at the beginning of this year at a cost of $40,000. The equipment’s

useful life is four years. Record the depreciation for this year and then determine the equipment’s carrying amount.

  1.    Journalize the adjusting entry needed at year end for each situation. Each scenario should be

considered independently.

Homework Answers

Answer #1

Adjusting entries

No General Journal Debit Credit
1 Interest expense 9000
Interest payable 9000
2 Interest receivable 2000
Interest revenue 2000
3 Unearned revenue 6000
Revenue earned 6000
4 Salaries expense 1000
Salaries payable 1000
5 Supplies expense (2100-800) 1300
Supplies 1300
6 Depreciation expense 10000
Accumulated depreciation-equipment 10000

Equipment carrying amount = 40000-10000 = $30000

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