Question

Exercise 4-12 A partial tabular summary for Concord Corporation on July 31, 2017, includes the accounts below before adjustments have been prepared. Assets = Liabilities + Stockholders' Equity Invest. Prepd. Acc. Depr.- Notes Rec. + Supplies + Rent + Bldgs. - Bldgs. Bal. 24,000 23,000 3,400 260,000 -130,000 Unearned Com Reatined Earnings = Serv. Rev. + Stock + Rev. - Exp. - Div 10,600 An analysis of the company's accounts shows the following. 1. The investment in the notes receivable earns interest at a rate of 6% per year. 2. Supplies on hand at the end of the month totaled $15,000. 3. The balance in Prepaid Rent represents 4 months of rent costs. 4. Employees were owed $3,100 related to unpaid salaries and wages. 5. Depreciation on buildings is $6,240 per year. 6. During the month, the company satisfied obligations worth $4,850 related to the Unearned Service Revenue. 7. Unpaid maintenance and repairs costs were $2,000. Prepare a tabular summary to record adjustments on July 31 assuming that adjustments are made monthly. (If a transaction results in a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or pai front of the amount entered for the particular Asset, Liability or Equity item that was reduced.) Assets - Liabilities + Int. Rec. + + Stockholders' Equity Retained Earnings Rev. - Exp. - Prepd. Rent 3,400 + - = Acc. Depr.- Bldgs. -130,000 Accts. Pay + Sal. & Wages Pay. Unearned Serv. Rev. 10,600 + Com. Stock Notes Rec. 24,000 + Supplies 23,000 Div Bldgs. 260,000 Bal.

Answer 1

Bal. Assets = Liab+stockholder's equity Retained earnings Notes Rec+ int receivable+ Supplies+ Pre. Rent+ Bldgs.- Acc dep = Unearned rev+ Accounts Payable+ Sal. Wages payable+Stock + Rev- Exp- Div 24,000 0 23,000 3,400 260,000 -130,000 10,600 120 120 -8,000 -8,000 -850 -850 3100 -3,100 -520 -520 -4,850 4850 2000 -2000 Interest on notes Supplies expense Rent expense for July Salary and wages expense Dep on building Service revenue Maintenance expense

Interest on notes receivable

=24000*6%/12

=$120 for the month of july

Supplies expense

Bal= $23,000

closing bal= $15,000

therefore, supplies used during the month= 23,000-15,000

=$8,000.

Rent expense for july

Prepaid rent for 4 months= $3,400

per month rent= 3400/4

=$850, this will be treated as expense for the month of July

Depreciation expense per annum= $6,240

Dep for 1 month = 6240/12= $520

$520 will be treated as dep expense for the month of July.

Understanding the adjustments .

		Dr.	Cr.
1	Interest receivable	120
	Interest revenue		120

(one month interest for the month of July will be credited as revenue and asset will be created as this interest is yet to be received in cash)

		Dr.	Cr.
2	Supplies expense	8000
	Supplies		8000

(supplies used during current month will be expensed and supplies asset will be reduced)

		Dr.	Cr.
3	Rent expense	850
	Prepaid rent		850

(out of 4 months of prepaid rent, rent for july me will be expensed and prepaid bal will be reduced)

		Dr.	Cr.
4	Salaries and wages exp	3,100
	Sal and wages payable	3,100

(salaries yet to be paid will be treated as expense and a liab will be created )

		Dr.	Cr.
5	Dep	520
	acc dep		520

(dep for the month of july will be expensed and the amount will be added to acc dep account)

		Dr.	Cr.
6	Unearned service rev	4,850
	Service revenue		4,850

(services rendered during current month will be recognized as rev and unearned liab bal will be then reduced)

		Dr.	Cr.
7	Maintenance exp	2,000
	accounts payable		2,000

(maintenance exp wil be recoginzed fr current month and liab will be created as those are yet to be paid)