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Chapter 3: Q8BE (page 128)

Included in Gonzalez Company鈥檚 December 31 trial balance is a note receivable of \(12,000. The note is a 4-month, 10% note dated October 1. Prepare Gonzalez鈥檚 December 31 adjusting entry to record \)300 of accrued interest, and the February 1 journal entry to record receipt of $12,400 from the borrower.

Short Answer

Expert verified

The total amount of cash received is $12,400.

Step by step solution

01

Step by Step SolutionStep 1: Meaning of Journal Entry 

Journal entries are the first step in the accounting cycle. Journal entry is used to record all the business transactions and events. In recording the journal entry, the debit and credit should be equal.

02

Journal Entries:

Gonzalez鈥檚 December 31 adjusting entry and February 1 journal entry are as follows:


Journal Entry

Date

Accounts Titles and Explanations

Debit

Credit

December 31

Interest Receivable

$ 300

Interest Revenue

$ 300

February 1

Cash

$ 12,400

Notes Receivable

$ 12,000

Interest Receivable

$ 300

Interest Revenue

$ 100

Working notes:

Interest Revenue = $ 300 (Given)

Notes Receivable = $ 12,000 (Given)

Interest Receivable = $ 300 (Given)

Interest revenue = [ $12,000 脳 10% 脳 1/12] = $100

Cash = $12,400 (Given)

  • Interest revenue only calculated for January month i.e., 1 month.

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Most popular questions from this chapter

E3-6 (L03) (Adjusting Entries) Karen Weller, D.D.S., opened a dental practice on January 1, 2017. During the first month ofoperations, the following transactions occurred.1. Performed services for patients who had dental plan insurance. At January 31, \(750 of such services was performed but notyet billed to the insurance companies.2. Utility expenses incurred but not paid prior to January 31 totaled \)520.3. Purchased dental equipment on January 1 for \(80,000, paying \)20,000 in cash and signing a \(60,000, 3-year note payable.The equipment depreciates \)400 per month. Interest is \(500 per month.4. Purchased a one-year malpractice insurance policy on January 1 for \)12,000.5. Purchased \(1,600 of dental supplies. On January 31, determined that \)500 of supplies were on hand.InstructionsPrepare the adjusting entries on January 31. (Omit explanations.) Account titles are Accumulated Depreciation鈥擡quipment,Depreciation Expense, Service Revenue, Accounts Receivable, Insurance Expense, Interest Expense, Interest Payable, PrepaidInsurance, Supplies, Supplies Expense, Utilities Expenses, and Accounts Payable.

鈥淎 worksheet is a permanent accounting record, and its use is required in the accounting cycle. 鈥淒o you agree? Explain.

The financial statements of (M&S) are presented in Appendix E. The company's complete annual report, including the notes to the financial statements, is available online.

Instructions

Refer to M&S鈥檚 financial statements and the accompanying notes to answer the following questions.

(a) What were M&S鈥檚 total assets at 28 March 2015? At 29 March 2014?

(b) How much cash (and cash equivalents) did M&S have on 28 March 2015?

(c) What were M&S鈥檚 selling and marketing expenses in 2015? In 2014?

(d) What were M&S鈥檚 revenues in 2015? In 2014?

(e) Using M&S鈥檚 fi nancial statements and related notes, identify items that may result in adjusting entries for prepaymentsand accruals.

(f) What were the amounts of M&S鈥檚 depreciation and amortization expense in 2014 and 2015?

The adjusted trial balance of Anderson Cooper Co. as of December 31, 2017, contains the following.

ANDERSON COOPER CO.

ADJUSTED TRIAL BALANCE

DECEMBER 31, 2017

Dr.

Cr

Cash

\(19,472

Accounts Receivable

6,920

Prepaid Rent

2,280

Equipment

18,050

Accumulated Depreciation鈥擡quipment

\) 4,895

Notes Payable

5,700

Accounts Payable

5,472

Common Stock

20,000

Retained Earnings

11,310

Dividend

3,000

Service Revenue

11,590

Salaries and Wages Expense

6,840

Rent Expense

2,260

Depreciation Expense

145

Interest Expense

83

Interest Payable

83

\(59,050

\)59,050

Instructions

(a) Prepare an income statement.

(b) Prepare a statement of retained earnings.

(c) Prepare a classified balance sheet.

When salaries and wages expense for the year is computed, why are beginning accrued salaries and wages subtracted from, and ending accrued salaries and wages added to, salaries and wages paid during the year?
See all solutions

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