Question

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X Company's accountant made adjusting entries at the end of the period for the following reasons:

$1,059 of unpaid interest on a bank loan

$553 of wages that were earned by employees but not paid

$1,380 of insurance that expired

What was the effect of these entries on total assets?

Answer 1

total assets would decrease by 1,380
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Please find below the answer
Statementshowing Computations
Paticulars	Amount
a) $1,059 of unpaid interest on a bank loan
Entry would be
Interest expense Dr
To Interest Payable
b) $553 of wages that were earned by employees but not paid
Wages expense DR
To Wages payable
c)
$1,380 of insurance that expired
Insurance expense Dr
To Prepaid insurance
Impact on totalAssets = Decline in prepaid insurance of 1,380
Total Assets would decrease by	1,380.00
Liabilities would increaseby 553+1059	1,612.00
Equity would decrease by 553+1059+1380	2,992.00
Assets = Liabilities +Equity
-1380 = 1612 - 2992