Adjusting Entries

Office supplies original cost $4,320.

Prepaid rent of $36,000 was paid for the months January, February and March.
The equipment costing $80,000 has useful life of 5 years and its estimated salvage value is
$14,000.
The interest rate on $20,000 note payable is 9%. Accrue the interest for one month.

The adjusting entries of Company A are:

Date Account Debit Credit
Jan31 Supplies Expense 18,480
Office Supplies 18,480
Supplies Expense = $22,800 $4,320 = $18,480
Jan31 Rent Expense 12,000
Prepaid Rent 12,000
Rent Expense = $36,000 3 = $12,000
Jan31 Depreciation Expense 1,100
Accumulated Depreciation 1,100
Depreciation Expense = ($80,000 $14,000) (5 12) = $1,100

Explanation: Cost of Equipment is $80,000 less $14 000 salvage value or scrap
value which is the depreciation expense. We are here to record just for the month
of January 2010.

Estimated useful life of Equipment is 5 years. We are going to compute how much
do the equipment depreciate every month.
Computation: ($80,000 $14,000) (5years 12 months) = $1,100

Jan31 Interest Expense 150

Interest Payable 150
Interest Expense = $20,000 (9% 12) = $150
Jan31 Unearned Revenue 3,000
Service Revenue 3,000