Question

Question 2

Scranton Motors Ltd faced the following situations.

•     The business has interest expense of $9,000 early in January 2017.
•     Interest revenue of $2,000 has been earned but not yet received.
•     When the business collected $12,000 in advance three months ago, the accountant debited

Cash and credited Unearned Revenue. The client was paying for two cars, one delivered in

December, the other to be delivered in February 2017.

•     Salary expense is $500 per day – Monday through Friday – and the business pays employees

each Friday. For example, purposes, assume that this year, December 31 falls on a Tuesday.

•     The unadjusted balance of the Supplies account is $2,100. The total cost of supplies on hand is

$800.

•     Equipment was purchased at the beginning of this year at a cost of $40,000. The equipment’s

useful life is four years. Record the depreciation for this year and then determine the equipment’s carrying amount.

1.    Journalize the adjusting entry needed at year end for each situation. Each scenario should be

considered independently.

Answer 1

Adjusting journal entry at the end of the year(31st dec):-

Note on Depriciation:-

Computation of Carrying Amount at the end of 31.december

Particulars	Amount($)
Cost of the Equipment	40,000
Less- Accumulated Depriciation (40,000/ 4 year)	(10,000)
Carrying Amount at the end of 31.12	30,000

Note on Salaries Expenses:-

Here the year end on Tuseday i.e.31st december and the salary is payable on Friday. so Monday, & Tusseday is falls under this so this year salay is payable on friday in next year . so 2 days salary is consider as expense and this salary should payable on friday so for this reason 2 days salary i.e ($500 per * 2day) = $1,000 is salary expenses(debit side) for the year and it is not paid so it creates a liability (on the credit side ).