May someone help me with these adjusting journal entry! PLEASE EXPLAIN THE ANSWE
ID: 2405947 • Letter: M
Question
May someone help me with these adjusting journal entry! PLEASE EXPLAIN THE ANSWER OR SHOW THE STEPS! THANK YOU
Beginning Balance Dec 31
Journal Entry during January
January 27 CIS installed and tested the new barcode system. The warehouse mtanager approved the installation and commented that she thinks works great. GBI wrote a Check to CSI for the balance owed and gave it to the installer.
journal entry for January 27 transaction:
Production machinery, equipment and Fixture 8800
Deposit on purchased cr 2000
Bank Account cr 6800
Adjusting journal entries as of Jan 31, not already given in the original transactions:
1. Production Machinery, Equipment and Fixtures were placed in service on January 1, 2013, with no salvage value. The bar-code system has a 5-year life and no salvage value. GBI depreciates fixed assets on a straight-line basis and those assets acquired in the first half of the months are depreciated for the entire month, while fixed assets placed in service during the last half of the month are not depreciated until the second month. Depreciation is rounded to the nearest dollar and assets are depreciated on a monthly basis (i.e. number of days in the month is not of consequence).
2. Liability Insurance for the six-month period ending on january 31 was paid las August on the first of the month. Liability insurance is assumed to be utilized uniformly over the six month policy period.
this is my adjusting entry but i dont know if its correct:
debit insurance expense 600
credit prepaid insurance 600
Debit Balance Credit Balance 100000 Bank Account $300,318 110100 Accounts Receivable (Direct Posting Account) 94,670 110150 Allowance for Bad Debts 2,600 200600 Inventory-Operating Supplies 8,832 200900 Inventory-Raw Materials (Direct Post) 52,000 200910 Inventory-Finished Goods (Direct Post) 281,298 200920 Inventory-Trading Goods (Direct Post) 66,474 210000 Prepaid Insurance 3,000 212000 Prepaid Advertising 2,400 220110 Land (Direct Post) 528,000 220210 Production Machinery, Equip & Fixtures (Dir.Post) 915,000 220310 Accumulated Depreciation-Machinery (Direct Post) 408,000 300200 Accounts Payable (Direct Posting Account) 48,000 300700 Payables-Salaries and Wages 94,313 300800 Accrued Expenses 2,200 320000 Accrued Tax – Output 4,000 329000 Common Stock 1,010,000 329100 Additional Paid-in-Capital 52,870 330010 Retained Earnings (Direct Posting) 630,009Explanation / Answer
1) Since machine was purchased and put to use on 27th Jan i.e. during 2nd half of month depreciation will be calculated only from second/next month. So no entry for depreciation needed as of 31st Jan
2) Since Insurance for six month period is ending January 31st.. Whatever is reflecting in Prepaid expense during Dec 31st should be expense for Jan since coverage period was only till Jan 31st hence entry should be
Debit Insurance expense 3000
Credit Prepaid Insurance 3000