Question

Q1)A Company purchased computer equipment on May 1, 2019 for $4,500. The company expects to use the equipment for 3 years. It has no salvage value. If financial statements are to be prepared on monthly, the company should make the following adjusting entry: *

1)Debit Depreciation Expense, $125;

Credit Accumulated Depreciation, $125

2Debit Depreciation Expense, $1,500; Credit Accumulated Depreciation, $1,500

3)Debit Depreciation Expense, $1,000; Credit Accumulated Depreciation, $1,000

4)None of the above

Q2))Baden Company received a check for $16,000 on July 1 which represents a 4 month advance payment of rent on a building it rents to a client. Unearned Rent was credited for the full $16,000. Financial statements will be prepared monthly. Baden should make the following adjusting entry on July 31: *

1)Debit Unearned Rent Revenue, $3,000; Credit Rent Revenue, $3,000

2)Debit Rent Revenue, $3,000; Credit Unearned Rent Revenue, $3,000

3)Debit Unearned Rent Revenue, $16,000; Credit Rent Revenue, $16,000

4)None of the above

Q3))A Company purchased office supplies costing $6,000 and debited Office Supplies for the full amount. At the end of the accounting period, a count of office supplies revealed $2,400 had been used. The appropriate adjusting journal entry to be made at the end of the period would be: *

1)Debit Office Supplies Expense, $2,400; Credit Office Supplies, $2,400

2)Debit Office Supplies, $3,600; Credit Office Supplies Expense, $3,600

3)Debit Office Supplies Expense, $3,600; Credit Office Supplies, $3,600

4)Debit Office Supplies, $2,400; Credit Office Supplies Expense, $2,400

Answer 1

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Answer
Q1)
1)Debit Depreciation Expense, $125;
Credit Accumulated Depreciation, $125
Cost of equipment is 4500 $ with life of 3 years/ 36 months
As it has no salvage value , monthly depreciation = 4500/36 =125 $
We charge the monthly depreciation amount of 125 $ as the financial statements are prepared monthly.
Depreciation is an expense of the wear and tear of the assets.Accumulated depreciation account shows the depreciation provided over the life of the asset as a credit balance .

Q2) 4) None of the above
Unearned income/ revenue is an income received for a service which is yet to be provided .It is an income received in advance. Initially the unearned revenues are recorded as a liability .As the revenue is earned , the balance of unearned revenue account is reduced . In the question initially the balance of unearned revenue account is 16000$(credit) BY july 31 , 16000/4 = 4000 $ worth of revenue would have been earned . Therefore entry required will be
Debit Unearned Rent Revenue, 4000$; Credit Rent Revenue, 4000$
Thre is no option with same amounts .

Q3)1)Debit Office Supplies Expense, $2,400; Credit Office Supplies, $2,400
Office supplies is an asset account . As the 2400$ worth of supplies will be used the debit balance will be reduced by crediting the office supplies account .