Question

Javier Computer Services began operations in July 2019. At the end of the month, the company prepares monthly financial statements. It has the following information for the month. 1. At July 31, the company owed employees $1,300 in salaries that the company will pay in August. 2. On July 1, the company borrowed $20,000 from a local bank on a 10-year note. The annual interest rate is 12%. 3. Service revenue unrecorded in July totaled $2,400. Prepare the adjusting entries needed at July 31, 2019. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Answer 1

Answer:

wages expense   1,300 debit

        wages payable     1,300 credit

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interest expense      200 debit

             interest payable     200 credit

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account receivable      2,400 debit

          service revenue       2,400 credit

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Explanation:

we recognize the wages expense for the current period and the liability that arise from that.

interest: principal x rate x time

time and rate should be in the same metric so we express the time in portion of a year.

From July 1st to July 31th a month has past so 1/12 of a year:

20,000 x 12% x 1/12  = 200

this will be the accrued interest for the period

we must record service revenue. As it is not collected it goes int oaccount receivable