Homework Answers
1) 7/1/20 Journal entry:
| Date | Account title and explanation | Debit | Credit |
| 7/1/20 | Equipment | $10,000 | |
| Cash | $10,000 | ||
| [To record purchase of equipment for cash] |
2) Adjusting entry:
| Date | Account title and explanation | Debit | Credit |
| 12/31/20 | Depreciation expense | $1,000 | |
| Accumulated depreciation | $1,000 | ||
| [To record depreciation expense] |
Calculations:
Depreciation expense for 6 months = [(Cost-Salvage value)÷Estimated useful life ] x 6/12
= [($10,000-2,000)/4] x 6/12
=[$8,000/4] x 1/12
=$1000
3) Balance sheet:
| Discord Records | |||||
| Balance Sheet | |||||
| December 31,2020 | |||||
| Assets | Before | After | Liabilities | Before | After |
| Cash | 40,000 | 30,000 | Accounts payable | 2,000 | 2,000 |
| Accounts receivable | 4,000 | 4,000 | Taxes payable | 5,000 | 5,000 |
| Supplies | 1,000 | 1,000 | Deferred Revenue | 10,000 | 10,000 |
| Prepaid Insurance | 3,000 | 3,000 | |||
| Equipment, net | 35,000 | 44,000 | Stockholders' Equity | ||
| Building, net | 50,000 | 50,000 | Common stock | 120,000 | 120,000 |
| Land | 12,000 | 12,000 | Retained earnings | 8,000 | 7,000 |
| Total assets | 145,000 | 144,000 |
Total Liabilities and Stockholders' Equity |
145,000 | 144,000 |
Explanation:
Cash balance reduced by 10,000 as cash paid for purchase of new equipment.
Equipment balance increased by $10,000 as it is a new purchase and reduced by $1000 for accumulated depreciation
Retained earnings was reduced by $1,000 as it is a depreciation expense
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