Question

Record the effect, if any, of the transaction entry or adjusting entry on the appropriate balance sheet category or on the income statement by entering the account name and amount and indicating whether it is an addition (+) or subtraction (–). Column headings reflect the expanded balance sheet equation; items that affect net income should not be shown as affecting stockholders' equity. The first transaction is provided as an illustration.

1. During the month, the Supplies (asset) account was debited $1,750 for supplies purchased. The cost of supplies used during the month was $1,300. Record the adjustment to properly reflect the amount of supplies used and supplies still on hand at the end of the month.
2. An insurance premium of $430 was paid for the coming year. Prepaid Insurance was debited.
3. Wages of $3,375 were paid for the current month.
4. Interest revenue of $290 was received for the current month.
5. Accrued $600 of commissions payable to sales staff for the current month.
6. Accrued $150 of interest expense at the end of the month.
7. Received $2,400 on accounts receivable accrued at the end of the prior month.
8. Purchased $670 of merchandise inventory from a supplier on account.
9. Paid $180 of interest expense for the month.
10. Accrued $870 of wages at the end of the current month.
11. Paid $600 of accounts payable.

Required:

1. Indicate the financial statement effect.
2. Prepare the journal entry for the above transactions.

Answer 1

1)
Transaction	Assets	Liabilities	Owners’ Equity	Net Income
a)	Supplies -450			Supplies Exp. - 450
b)	Prepaid Insurance +430
	Cash - 430
c)	Cash - $3375			Wages Exp. -$3375
d)	Cash + 290			Interest Revenue +$290
e)		Commissions Payable + 600	Commission -$600
f)		Interest Payable + 150	Interest Exp. -150
g)	Cash + 2400
	Accounts Recivables -2400
h)	Inventory  +670	Accounts Payable + 670
i)	Cash -180			Interest Exp. -$180
j)		Wages payable + 870	Wages exp. - 870
k)	Cash - 600	Accounts Payable - 600
2)
Transaction	Account Titles & Explanation	Debit	Credit
a)	Supplies Expenses	450.00
	Supplies		450.00
b)	Prepaid Insurance	430.00
	Cash		430.00
c)	Wages Expenses	3,375.00
	Cash		3,375.00
d)	Cash	290.00
	Interest Revenue		290.00
e)	Commission Expenses	600.00
	Commission Payable		600.00
f)	Interest Exp.	150.00
	Interest Payable		150.00
g)	Cash	2,400.00
	Accounts Receivables		2,400.00
h)	Merchandise Inventory	670.00
	Accounts Payable		670.00
i)	Interest Exp.	180
	Cash		180
j)	Wages Exp.	870
	Wages Payable		870
k)	Accounts Payable	600
	Cash		600