Question

Three former college classmates have decided to pool a variety of work experiences by opening a store near campus to sell wireless equipment to students. The business has been incorporated as University Wireless.

Required: Several transactions occurred in March. Each is described separately in this folder. For each transaction, indicate the accounts that are affected, whether they increase or decrease, and the amount of the increase or decrease.

Transaction 8
On March 1, fixtures and equipment were purchased for $4,000 with a downpayment of $2,000 plus a $2,000 note payable in one year. Interest of 4.5% per year is due when the note is repaid. The estimated life of the fixtures and equipment is 8 years with no expected salvage value. Depreciation on the fixtures and equipment is computed on a straight-line basis. [Note: Record the March 1 equipment purchase first, then the March 31 depreciation adjusting entry, and finally the March 31 interest adjusting entry. Also, round all answers to the nearest cent.]

(Options for Account portion:Cash, Accounts Recievable, Inventory, Prepaid Rent, Fixtures and Equipment, Accounts Payable, Interest Payable, Wages Payable, Notes Payable, Paid-In Capital, Retained Earnings, Leave Blank)

Account:               Dollar amount:     

Account:               Dollar amount:     

Account:               Dollar amount:     

Account:               Dollar amount:     

Account:               Dollar amount:     

Account:               Dollar amount:     

Account:               Dollar amount:     

Account:               Dollar amount:

Answer 1

Transaction 8 Account Account Account Account Account Cash Dollar amount Fixtures and equipment Dollar amount Notes payable Dollar amount Interest payable Dollar amount Retained earnings Dollar amount 2000 3958 ( 4000 - 42) 2000 7.5 49.5 (42+7.5) 4000 Entry is :- Fixtures and equipment Cash Notes payable 2000 2000 42 Retained earnings Fixtures and equipment 42 (4000/8)* 1/12 7.5 (2000 * 4.5 % 1/12) Retained earnings Interest payable 7.5 Note : Here expenses account are not given like dep. Exp. And interest exp., therefore, entry is directly recorded in Retained earnings account. Similarly acc. Dep. Account was not given in options therefore, Fixtures and equipment heve been credited for $42.