Use the following information to answer questions 1-5. The Aggie Graphics Compan
ID: 2406743 • Letter: U
Question
Use the following information to answer questions 1-5.
The Aggie Graphics Company was organized on January 1, 2017.
The trial balance before adjustment at December 31, 2017 contained the following account balances:
Analysis 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)
Supplies for $1,500
Supplies for $1,200
Supply Expense for $1,200
Prepaid Supply Expense for $2,700
1 points
QUESTION 2
What is the balance in the interest payable account after adjustment?
$ 45
$180
$90
$270
1 points
QUESTION 3
The correct entry to record (E) above is:
Depreciation Expense 4,500
Accumulated Depreciation 4,500
Depreciation Expense 9,000
Accumulated Depreciation 9,000
Depreciation Expense 9,000
Equipment 9,000
Depreciation Expense 9,000
Accumulated Depreciation 4,500
Equipment 4,500
Cash $9,500 Accounts Receivable 4,000 Prepaid Insurance 1,800 Equipment 45,000 Accumulated Depreciation 4,500 Accounts Payable 3,500 Notes Payable 18,000 Common Stock 5,000 Retained Earnings 12,000 Dividend 2,000 Graphic Fees Earned 52,100 Consulting Fees Earned 5,000 Salaries Expense 30,000 Supplies Expense 2,700 Advertising Expense 1,900 Rent Expense 1,500 Utilities Expense 1,700 $100,100 $100,100Explanation / Answer
Solution:
Question 1 --
The entry to record (A) above would include a debit to:
The correct option is B. Supplies for $1,200 (Balance Sheet Item)
Explanation – The Company recorded All the Supplies purchase in January as Supplies Expense. At the end of Dec 31, Supplies in hand was $1,200 it means $1,200 is Supplies which will be shown in Balance Sheet as Supplies under Current Assets.
So, we need to reduced the Supplies Expense by $1,200 and Debit the Supplies (Balance Sheet Item).
Question 2 ---
What is the balance in the interest payable account after adjustment?
The correct option is B. $180
Explanation -- Notes was issued on Sept 1 and has 3% interest rate for 6 month.
So, from Sept 1 to Dec 31, total 4 months interest to be recorded.
4 months Interest Expense = $18,000*3%*4/12 = $180
Question 3 –
The correct entry to record (E) above is:
The correct option is
A.
Depreciation Expense 4,500
Accumulated Depreciation 4,500
One year depreciation = (Cost of Equipment $45,000 – Salvage Value 0) / Life 10 = $4,500
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A.
Depreciation Expense 4,500
Accumulated Depreciation 4,500