Question

Prepare any necessary journal entries for 2020, including adjusting entries.

1. On 1/1/20 Acme Bakery purchased equipment for $50,000 cash. They estimated that they would be able to use the equipment for 5 years.
2. On 1/1/20, Acme Bakery entered into a 2-year rental agreement. They paid $24,000 on 1/1/20 for the 2-year lease.
3. Acme borrowed $100,000 from a bank on 9/1/20 at an 8% interest rate. The loan plus interest is to be repaid on 9/1/21.
4. Acme’s employees earned $1,000 as of 12/31/20 which will be paid to them on 1/5/21.
5. Acme determined that its bad debt expense associated with its accounts receivable is $2,500.

Answer 1

Journal Entries 0 on 1/1/20 for purchase of Eauipment: Property plant and Equipment Acc -- Dr $50,000 $50,000 To cash ATC (Narration: Being equipment purchased on 1/1/20.) Ⓡ on 1/1/20 for payment of lease rent: pre-paid lease rent Al--- dr $24,000 - TO Bank ATC $24,000 (Being amount paid towards lease rent for 2 years) At 121311200) lease rent All--mr $12,000 to prepaid lease rent Ac $12,000 b) profit and Loss Me - Dr $12,000 To lease rent Ac $12,000 (Being lease rent Expenses for the year 2000 transferred to profit and loss account At 12/31/21 : 9) lease rent Al--my $12,000 to prepaid lease rentflc $12,000 b) Profit and lass Alc--$12,000 to lease sent Ac $12,000 (Being lease rent expenses for the year 2024 transferred to profit and loss account)

3 on 9/1) 20: For Amount borrowed from Bank. Bank Alco-Dr $400,000 To by Loan ATC $ 100,000 (Being $ 100,000 borrowed from bank at an 8%) At al1/21: For payment of loan along with Intesest B4. Loan Alc-Dr $100,000 Inteseston 84. ($ 100,000 X87.) - To Bank Alc. $108,000 (Being repayment of 87 loan principle amount and payment of Interest on Bf loan prüd.) Loan A pr $ 8,000 on 12-/31/20 Salaries Alco-DY $1000 to Salary payable Alc $1,000 (Being Salary amount tansferred to salary payable account for the year ended 2020.) on H15121: Salary payable Ali Dr $1000 To Bank ATC $1,000 (Being salary of the December months paid on 115121) bad debt Expenses AC-DX $2,500 - To Debiors ALC $2,500 (accounts receivable) Being account receivables are treaded as Beddebts.)

profit and loss AC ---Dr $2500 To Bad debts Expenses Ac $ 2500 (Being bad debt expenses recognised in profit and loss account)