Question

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Exercise 3-13 The ledger of Armour Lake Lumber Supply on July 31, 2020, includes the selected accounts below before adjusting entries have been prepared. Debit Credit $20,000 Notes Payable Supplies Prepaid Rent Buildings Accumulated Depreciation Buildings Unearned Service Revenue $24,000 3,600 250,000 $140,000 11,500 An analysis of the company's accounts shows the following. 1. The notes payable pays interest at a rate of 6% per year. 2. Supplies on hand at the end of the month totaled $18,600. 3. The balance in Prepaid Rent represents 4 months of rent costs. 4. Employees were owed $3,100 related to unpaid salaries and wages. 5. Depreciation on buildings is $6,000 per year. 6. During the month, the company satisfied obligations worth $4,700 related to the Unearned Services Revenue. 7. Unpaid maintenance and repairs costs were $2,300.

Answer 1

- 900 Prepare the adjusting entries at July 31 assuming that adjusting entries are made monthly. No. Date Account Titles and Explanation Debit Credit 1 July 31 Interest Expense 100 Interest Payable 100 2 July 31 Supplies Expense 5,400 Supplies 5,400 3 July 31 Rent Expense Prepaid Rent 900 4 July 31 Salaries and Wages Expense Salaries and Wages Payable 3,100 5 July 31 Depreciation Expense 500 Accumulated Depreciation-Buildings 500 July 31 Unearned Service Revenue 4,700 Service Revenue 4,700 7 July 31 Maintenance and Repairs Expense 2,300 Accounts Payable 2,300 3,100

Explanation: Interest expense = [($20,000 x 6%) - 12 months] = $100 per month Supplies expense = ($24,000 – $18,600) = $5,400 Rent expense = ($3,600 -- 4 months) = $900 per month Depreciation expense-Buildings = ($6,000 = 12 months) = $500 per month