Question

Create Journal Entries with the following information below.

1) The business pays, in advance for 1 years’ worth of truck insurance.

2) The owner withdrew $2,000 in cash to make a mortgage payment on his home.

3) On Jan 1, BCo received $3,000 from a customer to provide landscape services for Jan, Feb and Mar. (BCo already made the correct entry on Jan 1 debiting Cash and crediting Unearned Revenue).   Prepare BCo’s adjusting entry for JAN 31

4) A machine was purchased for $24,000 on JAN 1. Its estimated useful life is 48 months. Prepare the entry for depreciation on JAN 31.

Answer 1

1	Date	Dr Prepaid Expenditure (truck insurance)
		Cr Cash
		(Being prepaid truck insurance accounted)
2		Dr Drawings $ 2,000
		Cr Cash $ 2,000
		(Being drawings by the owner for personal use accounted)
3	Jan 31	Dr Unearned Revenue $ 1,000
		Cr Income from landscape services $1,000
		* Assumed that revenue of $3,000 is equally billed in 3 months
		(Being income earned in the month of Jan transferred to Income account)
4	Jan 31	Dr Depreciation expense $ 500
		Cr Accumulated depreciation $ 500
		(Being depreciation accounted for the month of Jan)

Workings for depreciation

Assuming salvage value as NIL

Depreciation = Depreciable value / Useful life of the asset

= $24,000/48 = $500 per month