Question

Record the effect, if any, of the transaction entry or adjusting entry on the appropriate balance sheet category or on the income statement by entering the account name and amount and indicating whether it is an addition (+) or subtraction (-). Column headings reflect the expanded balance sheet equation; items that affect net income should not be shown as affecting stockholders' equity. The first transaction is provided as an illustration. a. During the month, the Supplies (asset) account was debited $1,900 for supplies purchased. The cost of supplies used during the month was $1,150. Record the adjustment to properly reflect the amount of supplies used and supplies still on hand at the end of the month. b. An insurance premium of $420 was paid for the coming year. Prepaid Insurance was debited. c. Wages of $3,450 were paid for the current month. d. Interest revenue of $240 was received for the current month. e. Accrued $690 of commissions payable to sales staff for the current month f. Accrued $160 of interest expense at the end of the month. g. Received $2,350 on accounts receivable accrued at the end of the prior month. h. Purchased $660 of merchandise inventory from a supplier on account i. Paid $140 of interest expense for the month. J. Accrued $860 of wages at the end of the current month. k. Paid $550 of accounts payable. Required: a. Indicate the financial statement effect. b. Prepare the journal entry for the above transactions.

Answer 1

Requirement a

	Balancesheet category			Income statement
Transactions Adjustments	Assets	Liabilities	Stockholders Equity	Net Income effect
a	Supplies = 750	accounts payable = 1900		Cost of supplies used = 1,150
b	Prepaid insurance = 420
	cash/bank = -420
c	cash/bank = -3,450			wages expense = 3,450
d	cash/bank = 240			Interest income = 240
e		commissio payable = 690		commission expenses = 690
f		interest payable = 160		interest expense = 160
g	cash/bank = 2,350
	Accounts receiavles = -2,350
h	merchandies inventory = 660	accounts payable = 660
i	cash/bank = -140			interest expense = 140
j		wages payable = 860		wages expense = 860
k	cash/bank = -550	accounts payable = 550

Requirement b

Event	Gerenal Journal	Debit	Credit
a	Supplies	750
	Cots of supplies used	1,150
	To accounts payable		1,900
	(Being supplies purchased and used for the year)
	Assumed to be purchased on credit
b	Prepaid insurance	420
	To cash/bank		420
	(Being insurance premiun of next year paid)
c	Wages	3,450
	To Cash/bank		3,450
	(Being wages for the current month paid)
d	Cash/bank	240
	To interest revenue		240
	(Being interest for the current month received)
e	Commission expense	690
	To commission payable		690
	(Being commission expenses accrued for the month)
f	Interest expense	160
	To interest payable		160
	(Being interest expense accrued for the month)
g	Cash/bank	2,350
	To accounts receivables		2,350
	(Being accounts receivables received)
h	Merchandies inventory	660
	To accounts payable		660
	(Being inventory purchased)
i	Interest expense	140
	To cash/bank		140
	(Being interest paid for the month)
j	Wages	860
	To wages payable		860
	(Being wages for the current month accrued)
k	Accounts payable	550
	To cash/bank		550
	(being accounts payable paid)