Question

understate prepaid expenses understate both liabilities and expenses overstate liabilities On November 1, 20X4, ComCo debits Cash and credits Notes Payable for $20.000 for a note maturing May 1, 20X5. At that time. ComCo must repay the entire $20,000 plus interest of 6% accrued annually. If no adjusting entry is made at year-end 20X4.Com.co will record a correcting entry that: debits Interest Expense for $400 credits Interest Payable for SIOO c. debits Interest Expense for $200 d. none of the above Your employer has a Monday-Friday workweek and distributes its $20,000 payroll cach Friday. In 20X1. December 31 is a Thursday. One of your assistants debited Salaries Expense and credited Salaries Payable for $12.000. If no correcting entry is recorded: a. the balance sheet will overstate assets b. the income statement will over state expenses e. the balance sheet will overstate liabilities d. the balance sheet will overstate retained earnings Your employer has a Monday-Friday workweek and distributes its $35,000 payroll each Friday. In 20X2, December 31 is a Tuesday. One of your assistants debited Salaries Expense and credited Salaries Payable for $18,000. Your correcting entry will: a. debit Salaries Expense for $6,000 b. debit Salaries Payable for $6,000 c. credit Salaries Expense for $4,000 d. credit Salaries Payable for $4,000 5. A calendar year company plans to pay its December gas bill in January. As of December 31. no adjusting entry has been recorded. As a result: a. the balance sheet total will overstate assets b. the balance sheet total will overstate retained earnings c. the income statement total overstate expenses d. the balance sheet total will overstate liabilities On March 1. 20X1. your calendar year company borrows $10,000. Terms require repayment of principal and annual interest of 9% after 4 years. At year-end 20X1, an adjusting entry accrues $550 interest expense. If you discover the error before the books are closed, what is the correcting entry? a. Interest Payable 600 Interest Expense 600 b. Interest Expense Interest Payable 600 c. Interest Expense Interest Payable

Answer 1

Solution : Interest = 20000 66 x 2112 = $200 (c) debit - (Note: We Interest need to Expense credit for Interest $200. payable for $200) Payroll from . Mon - Fri = $20,000 - As on Dec 31 2001, thursday , no. of days worked are 4 days. Hence accrued salaries - 20000 x 4 = $16000 Howenen, recorded amount is $12,000. Rectification entry which is not yet recorded: - Salaries Expensen n. $4000 a - Salanes Payable Cro $4000 Due to not recording above, - 1 Retained earning is overstated by $4000 for not recording salaries Expenses. (ii liability is understated by $4,000. overstate Hence anned with la mScanner (d) the balance sheet will retained earning

Salanes Sokana per week = $35,000 for 2 days, re., till 12/31 ='35000 02 = $14,000 Amount recorded = $18,000 There fure, rectifying entry : Salarios payable Dr. Salasies Epponses Cri $4000 ' $4000 (c) Credit Salosion Expenses for $4000 Required journal entry for the gas bill on Dec '31;u D GOSA Expenses Alc . - Expense Povable Payable cr. a . Due to not recording the above entry: o Relained earning is overo rater for not recording expemes i liabilities is understated for auf recording Expense payable correct answer: (6) the balance sheet will over state relerind eal Stanned wilos niny damScanner

6 Interest exponses = 10000 8 9% 8 10/12 = $750 Amount recorded = $550 - Short are : 750 - 550 = $200 Hence, (0 Interest Expense Dni 200 - Interest Payable ca. 200 - cs Schinned with CamScanner