Question

The Aggie Graphics Company was organized on January 1, 2017.The trial balance before adjustment at December 31, 2017 contained the following account balances:Cash $9,500 Accounts Receivable 4,000 Prepaid Insurance 1,800 Equipment 45,000 Accumulated Depreciation 4,500Accounts Payable 3,500Notes Payable 18,000Common Stock 5,000Retained Earnings 12,000Dividend 2,000 Graphic Fees Earned 52,100Consulting Fees Earned 5,000Salaries Expense 30,000 Supplies Expense 2,700 Advertising Expense 1,900 Rent Expense 1,500 Utilities Expense 1,700 $100,100 $100,100Analysis reveals the following additional data: (Assume the books are only closed at year end)(A) The $2,700 balance in Supplies Expense represents supplies purchased in January. At December 31, there was $1,200 of supplies on hand.(B) The note payable was issued on September 1. It is a 3% 6-month note.(C) The balance in Prepaid Insurance is the premium paid on a one-year policy, dated March 1, 2017.(D) Consulting Fees are credited to revenue when received. At December 31, consulting fees of $1,000 contracted for January, 2017 have yet to be performed.(E) The equipment was purchased on January 1, 2017. It has a 10-year useful life and no salvage value.The entry to record (A) above would include a debit to: (Assume the company is only making one adjusting entry to record this information)A. Supplies for $1,500B. Supplies for $1,200C. Supply Expense for $1,200D. Prepaid Supply Expense for $2,7001 points QUESTION 2What is the balance in the interest payable account after adjustment?A. $ 45B. $180C. $90D. $2701 points QUESTION 3The correct entry to record (E) above is:A. Depreciation Expense 4,500Accumulated Depreciation 4,500B. Depreciation Expense 9,000Accumulated Depreciation 9,000C. Depreciation Expense 9,000Equipment 9,000D. Depreciation Expense 9,000Accumulated Depreciation 4,500Equipment 4,500

Answer 1

Answer: 1. B. Supplies for $1,200

2. $180

3. A. Depreciation Expense 4,500

Accumulated Depreciation 4,500.

Explanation:

• 1: The entry to record (A) above would include a debit to supplies for $1,200. It should be noted that all the supplies that were recorded by the company in January were recorded as supply expenses and supplied in hand were $1200 as at December 31st. This will be shown in the balance sheet as the supplies expenses will be reduced by $1200 which means supplies will be debited.

•2: The balance in the interest payable account after adjustment will be:

= $18,000 × 3% × 4/12

= $18000 × 0.03 × 1/3

= 180

Note that 4months out of 12 months was used as notes were issued on September 1 which is 4 months till December.

• 3: The correct entry to record (E) above is:

A. Depreciation Expense 4,500

Accumulated Depreciation 4,500