Question

Additional Exercise 228 Mother Hips Garment Company purchased equipment on June 1 for $90,000, paying $20,000 cash and signing a 9%, 2-month rate for the remaining balance. The equipment is expected to depreciate $18,000 each year, Mother Hips Garment Company prepares monthly financial statements. Prepare the general journal entry to record the acquisition of the equipment on June 1st. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter for the amounts.) Date Account Titles and Explanation Debit Credit June 1 Prepare any adjusting journal entries that should be made on June 30th. (Credit account tities are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter o for the amounts.) Date Account Titles and Explanation Debit Credit June 30 (To record monthly depreciation) June 30 (To accrue interest on notes payable)

Answer 1

Solution:

Journal Entries - Mother Hips Garment Company
Date	Particulars	Debit	Credit
1-Jun	Equipment Dr	$90,000
	To Cash		$20,000
	To Notes Payable		$70,000
	(To record purchase of equipment)

Journal Entries - Mother Hips Garment Company
Date	Particulars	Debit	Credit
30-Jun	Depreciation Expense Dr ($18,000/12)	$1,500
	To Accumulated Depreciation - Equipment		$1,500
	(To record depreciation on equipment)
30-Jun	Interest expense Dr	$525.00
	To Interest Payable ($70,000*9%*1/12)		$525.00
	(To accrue interest on note payable)

Mother Hips Garment Company
Balance Sheet (Partial)
As on June 30
Assets		Amount
Equipment	$90,000.00
Less: Accumulated depreciation	$1,500.00	$88,500.00