Use of Account Balances as a Basis for Adjustments LoriMatlock operates a graphic arts business. A list of accounts on June 30, 2010, before recording any adjustments, appears as follows: Cash ………….. $ 7,000Prepaid Rent ……….. 18,000Supplies …………. 15,210Office Equipment ………. 46,120Accumulated Depreciation—Equipment . 4,000Accounts Payable ………. 1,800Notes Payable ………… 2,000Capital Stock ……….. 50,000Retained Earnings ……… 24,350Dividends ………… 8,400Revenue ………….. 46,850Utilities Expense ………. 2,850Salaries Expense ………. 19,420Advertising Expense ……… 12,000Other Dataa. The monthly rent is $600.b. Supplies on hand on June 30, 2010, amount to $1,290.c. The office equipment was purchased on June 1, 2009. On that date, it had an estimated useful life of ten years and a salvage value of $6,120. d. Interest owed on the note payable but not yet paid amounts to $50. e. Salaries of $620 are owed but unpaid to employees at the end of the month. Required1. For each of the items of other data, (a) through (e), identify and analyze the necessary adjustments at June 30, 2010.2. Compute the net increase or decrease in net income for the month from the recognition of the adjustments in (1). (Ignore income taxes.)3. Note the balance in Accumulated Depreciation—Equipment of $4,000. Explain why the account contains a balance of $4,000 on June 30, 2010.View Solution:
Use of Account Balances as a Basis for Adjustments LoriMatlock



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