Question

i need help with this whole problem because i think i did it wrong

Packet Exercise 4.2 Zeus Inc. is a landscaping company that prepares annual financial statements on September 30th of each year. Using the information below prepare the requested journal or adjusting entries, Indicate the effect that each entry has on the company's net income. How does this entry affect Net Income? (cicle one) Information On 7/1/2018 Zeus Inc. received a check for $10,000 from a customer for lawn service for the 6 month period July-December. What entry was made on 7/1/2018 What entry is needed on 9/30/2018 ncreas Decrease None As of 9/30/2018 various investments owned by Zeus earned $200 in How does this entry affect interest income, but the cash has not yet been received by Zeus. Net Income? (circle one) What entry is needed on 9/30 2018 What entry is made when the interest is received in October On 9/1/2018 Zeus purchased supplies on account costing $800. How does this entry affect Decrease None Increase Decrease Sone Supplies were capitalized when purchased. As of 9/30/2018 the unused Net Income? (circle one) supplies totaled $320. What entry was made on 9/1/2018 Increase Decrease What entry is needed on 9/302018? What entries are needed if Zeus expensed the supplies when they were purchased on 9/1 What entry was made on 9/1/2018 es Erpense Increase Decrease None What entry is needed on 9/30/20182 Increase Decrease None 56

Answer 1

Following will be the journal entries and its effect on the net income :-

1 . Entry for receiving Cash from customer

Cash	10000		Effect on net income
Unearned revenue (To cash cash received from customer in advance )		10000	none

Entry to be made on 9/30/18

Unearned revenue	5000		Net effect on met income
Fees earned (To fees earned recognised as (10000x3/6)		5000	increase

Entry for interest receivable in investment on 9/30/18

Interest receivable	200		Effect on net income
Interest income (To interest on investment receivable )		200	increase

Entry in October for receiving Cash

Cash	200		Effect on net income
Interest receivable (To interest received)		200	none

Entry for supplies on 9/1/18

Supplies on hand	800		Effect on net income
Accounts payable (To supplies received )		800	none

Entry on 9/30/18 for recording consumption of supplies :-

Supplies expense	480		Effect on net income
Supplies on hand (To supplies exp for the month recorded as 800-320)		480	decrease by 480

If instead of capitalizing we hwe have straight away expensed supplies

Supplies expense	800		Effect on net income
To accounts payable (To supplies expense recorded upfront)		800	decrease by 800

Entry for lease

Prepaid office lease	36000		Effect on net income
Cash (To lease paid in advance for 12 months )		36000	none

E try on 9/30/18

Office lease expense	12000		Effect on net income
Prepaid office lease (To lease expense recorded for 4 months as 36000x4/12)		12000	decrease

Entry for purchasing machine as on 10/1/11

Machinery	72000		Effect on net income
Cash (Machine purchased )		72000	none

Entry for 9/30/18

Depriciation expense	7200		Effect on net income
Accumulated depriciation on machine (To depriciation on machine calculated as 72000-0/10= 7200		7200	decrease

Accumulated depriciation is a type of asset account but unlike other asset account, it will always have a credit balance and it is shown as reduction to gross fixed assets and thus referred as contra asset account .

7 years have passed since purchasing machine this total depriciation recorded so far for 7 years will be 7200x7 = $50400. Thus, balance of accumulated depriciation onachine will be $50400.

Entry for employee salary

Salary exp	8100		Effect on net income
Salary payable (To salary payable being not paid )		8100	decrease

Entry on 10/1/18

Salaries payable	8100		Effect on net income
To cash (To salary paid for previous year)		8100	none

Entry for signing note as on 12/1/17

Cash	150000		Effect on net income
Notes payable (To notes signed)		150000	none

Entry needed on 9/30/18

Interest expense	7500		Effect on net income
Accrued expense (To interest due for 10 months as 150000x6%x10/12)		7500	decrease

Entry on 10/1/18

Notes payable	150000		Effect on net income
Accrued interest	7500		None
Cash (To notes repaid along with interest)		157500

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