In: Accounting
Journal Entries for the transactions
1. Deferred Service Revenue Dr. 5,250
To Service Revenue 5,250
(Being services provided for cash already taken)
Since the services has been provided for 7 months, therefore proportionate amount has been transferred to service revenue) (9,000 * 7 /12)
2. Depreciation Expense Dr. 3,500
To Accumulated Depreciation 3,500
(Being depreciation expensedfor 2 months) (21,000 * 2 / 12)
3. Property Taxes Dr. 8,642
To Property Taxes Payable 8,642
It is accrued expense.
4. Accounts Receivable Dr. 7,000
To Service Revenue 7,000
It is accrued Revenue
5. Interest Expense Dr. 2,512.50
To Notes Payable 2,512.50
(Being interest expensed for 9 months ) ( $67,000 * 5% * 9/ 12)
We can also credit Interest payable in place of Notes payable as per the accounting followed.
It is accrued expense.
6. Wages and Salaries Expense Dr. 8,500
To Wages and Salaries Payable 8,500
(Being wages payable)
It is a case of accrued expense.
7. Cash Dr. 1,500
To Deferred Service Revenue 1,500
It is deferred Revenue or unearned revenue ( Deferred Service Revenue is used to credit as in 1 part it was written that this account is used for advance cash received)
8. Notes Receivable Dr. 70
To Interest Revenue 70
It is accrued revenue.
Since 6% is not p.a. it is assumed 6% is for 6 months i.e duration of the note and hence for 2 months revenue is recognised ($3,500 * 6% * 2/12)
We can also debit Interest Receivable in place of Notes Receivable as per the accounting followed.