The company underwent a major expansion in July. New staff was hired and more fi
ID: 2562872 • Letter: T
Question
The company underwent a major expansion in July. New staff was hired and more financing was obtained. Sheffield conducted the following transactions during July 2017, and adjusts its accounts monthly. Please write the journal entries for the following:
July 1- Purchased equipment, paying $4,000 cash and signing a 2-year note payable for $21,200. The equipment has a 4-year useful life. The note has a 6% interest rate which is payable on the first day of each following month.
July 3- Paid the first 2 (July and August 2017) months’ rent for an annual lease of office space for $4,200 per month.
July 13- Performed services for Fitzgerald Enterprises. This client paid $1,190 in advance last month. All services relating to this payment are now completed
July 14- Paid $420 cash for a utility bill. This related to June utilities that were accrued at the end of June.
Explanation / Answer
JOURNAL ENTRY :
DATE ACCOUNTS & EXPLANATION DEBIT CREDIT July 1 Equipment a/c 25200 Cash a/c 4000 Notes payable a/c 21200 (To record equipment purchased) July 3 Prepaid rent a/c 8400 Cash a/c 8400 (To record prepaid rent paid) July 13 Unearned service revenue a/c 1190 Service revenue a/c 1190 (To unearned service revenue adjusted) July 14 Utility bill payable a/c 420 Cash a/c 420 (To record bill paid) July 31 Depreciation expenses (25200/4)/12 525 Accumlated depreciation 525 (To record depreciation) July 31 Interest expensess a/c (21200*6%*1/12) 106 Interest payable a/c 106 (To record interest payable) July 31 Rent expenses a/c 4200 Prepaid rent a/c 4200 (To record prepaid rent adjusted)