Question

Read the description of following adjustments that are required at the end of the accounting period for Paulo Consulting Services. Record the necessary journal entries required at the end of January. (Round your answers to the nearest whole dollar.)
A. Equipment was purchased on January 1, 2019, for $49,770 and has an estimated useful life of 5 years with a salvage value of 4,270.
Depreciation is computed using the straight-line method.
B. Signed a 5-month contract for $5,490 of prepaid advertising on January 1, 2019.
C. Prepaid rent for the year on January 1, 2019, in the amount of 22,560.
D. Purchased supplies for $4,200 on January 1, 2019. Inventory of supplies was $2,850 on January 31, 2019.

Answer 1

Answer:

A. Equipment was purchased on January 1, 2019, for $49,770 and has an estimated useful life of 5 years with a salvage value of 4,270.

Depreciation is computed using the straight-line method.

depreciation expense per year = ($49,770 - $4,270) / 5 years = $9,100

depreciation expense per month = $9,100 / 12 = $758.33

January 31, 2019, depreciation expense

Dr Depreciation expense 758.33

    Cr Accumulated depreciation - equipment 758.33

B. Signed a 5-month contract for $5,490 of prepaid advertising on January 1, 2019.

advertising expense per month = $5,490 / 5 = $1,098

January 31, 2019, advertising expense

Dr Advertising expense 1,098

    Cr Prepaid advertising 1,098

C. Prepaid rent for the year on January 1, 2019, in the amount of 22,560.

rent expense per year = $22,560 / 12 = $1,880

January 31, 2019, rent expense

Dr Rent expense 1,880

    Cr Prepaid rent 1,880

D. Purchased supplies for $4,200 on January 1, 2019. Inventory of supplies was $2,850 on January 31, 2019.

supplies expense = $4,200 - $2,850 = $1,350

January 31, 2019, supplies expense

Dr Supplies expense 1,350

    Cr Supplies 1,350