Question

in the first year of operations Lien company entered into the following transactions among others:

a 1 january bought equipment 105000.

b 31 march prepaid one years rent 24000.

c 1 July took out a one year loan from the bank at an annual interest rate of 8 percent 20000.

d 1 August received payment for services not yet rendered 12000.

on 31 December lien has earned 8000 of the 12000 in transaction 4 and has incurred but not recorded 450 of electricity. lien prepares adjusting entries on an annual basis.

question: prepare journal entries for transactions a and d. prepare any adjusting journal entries needed at 31 December. assume that the equipment depreciates 15000 annually.

Answer 1

REQ1:
JOURNAL ENTRIES
DATE	ACCOUNTS TITLE AND EXPLANATION				DEBIT $	CREDIT $
1-Jan	Equipment Dr.				105000
	Cash Account					105000
31-Mar	Prepaid rent Dr.				24000
	Cash Account					24000
1-Jul	Cash Account Dr.				20000
	Bank loan payable					20000
1-Aug	Cash Account Dr,				12000
	Unearned service revenue					12000
ADJUSTING ENTRIES
DATE	ACCOUNTS TITLE AND EXPLANATION				DEBIT $	CREDIT $
31-Dec	Depreciation expense Dr.				15000
	Accumulated depreciation-Equipment					15000
31-Dec	Rent expense Account Dr. (24000/12*9)				18000
	Prepaid rent Account					18000
31-Dec	Interest expense Dr.				800
	Interest payable (20000*8%*6/12)					800
31-Dec	Unearned revenue Account Dr.				8000
	Service revenue					8000
31-Dec	Utilities expense Dr.				450
	Utilities payable Account					450