Instructions Clapton Guitar Company entered into the following transactions duri
ID: 2586806 • Letter: I
Question
Instructions Clapton Guitar Company entered into the following transactions during 2016·The transactions were properly recorded in permanent (balance sheet) accounts unless otherwise indicated.] Date Transaction Purchased $480 of office supplies. Rented a warehouse from Hendrix Company, paying 1 year's rent of $3,600 in advance. Recorded the $3,600 payment as rent expense. Borrowed $10,000 from the bank, signing a 1-year note at an annual interest rate of 12%. The bank insisted on collecting the interest in advance, so it withheld the interest amount from the funds disbursed to Clapton. The company recorded the transaction as a debit to Cash, $8,800, a debit to Interest Expense, $1,200, and a credit to Notes Payable, $10,000 Purchased office equipment for $15,000, paying $3,000 down and signing a 2-year, 12% (annual rate) note payable for the balance. The office equipment is expected to have a useful life of 10 years and a residual value of $1,500. Straight-line depreciation is appropriate Purchased a 3-year comprehensive insurance policy for $720. Jan. 25 Feb. 1 Mar. 1 May 1 May 31Explanation / Answer
Adjustment Entries
date
explanation
debit
credit
1-
31-Dec
property tax expense
2300
pretax income
27749
property tax payable
2300
less property tax expense
2300
utiltity expense
302
2-
31-Dec
utility expense
302
salary expense
927
utility bill payable
302
travel expense
787
depreciation expense-buillding
4600
3-
31-Dec
salary expense
927
depreciation expense-store equipment
6300
salary payable
927
office supplies expense
0
before tax net income after adjustment
12533
4-
31-Dec
travel expense
787
less income tax -30%
3759.9
prepaid travel
787
net income
8773.1
5-
31-Dec
office supplies expense
(figure is missing)
office supplies
6-
31-Dec
depreciation expense-buillding
4600
depreciation expense-store equipment
6300
accumulated depreciation-building
4600
accumulated depreciation-store equipment
6300
7-
31-Dec
income tax expense
3759.9
income tax payable
3759.9
Adjustment Entries
date
explanation
debit
credit
1-
31-Dec
property tax expense
2300
pretax income
27749
property tax payable
2300
less property tax expense
2300
utiltity expense
302
2-
31-Dec
utility expense
302
salary expense
927
utility bill payable
302
travel expense
787
depreciation expense-buillding
4600
3-
31-Dec
salary expense
927
depreciation expense-store equipment
6300
salary payable
927
office supplies expense
0
before tax net income after adjustment
12533
4-
31-Dec
travel expense
787
less income tax -30%
3759.9
prepaid travel
787
net income
8773.1
5-
31-Dec
office supplies expense
(figure is missing)
office supplies
6-
31-Dec
depreciation expense-buillding
4600
depreciation expense-store equipment
6300
accumulated depreciation-building
4600
accumulated depreciation-store equipment
6300
7-
31-Dec
income tax expense
3759.9
income tax payable
3759.9