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Chapter 3: 3-21E (page 163)

Question :Consider the following situations: a. Business receives \(3,200 on January 1 for 10-month service contract for the period January 1 through October 31. b. Total salaries for all employees is \)3,600 per month. Employees are paid on the 1st and 15th of the month. c. Work performed but not yet billed to customers for the month is \(1,600. d. The company pays interest on its \)16,000, 4% note payable of $53 on the first day of each month. Assume the company records adjusting entries monthly. Journalize the adjusting entries needed as of January 31.

Short Answer

Expert verified

Adjusting entries are as follows :

Transactions

Accounts and Explanation

Debit

Credit

(a)

Unearned Revenue

$320

Service Revenue

$320

To record service revenue earned

(b)

Salaries Expense

$1,800

Salaries Payable

$1,800

To record accrued salaries expense

(c)

Accounts Receivable

$1,600

Service Revenue

$1,600

To record service revenue earned

(d)

Interest Expense

$53

Interest Payable

$53

To record accrued interest expense

Step by step solution

01

Calculation of Service RevenueService revenue is calculated as follows: 

ServiceRevenue=AmountReceived×NumberofMonthsExpiredTotalMonthsofContract=$3,200×110=$320

02

Calculation of Salaries Expense

Salaries expense is calculated as follows

SalariesExpense=TotalSalariesNumberofTimesPaidinMonth=$3,6002=$1,800

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Most popular questions from this chapter

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