Question

A. On January 1, 2023, Adriana took out a bank loan for $60,000 with an interest rate of 5%. Interest is payable on the first day of each following month.

b. Students paid $30,000 in advance for cooking classes. At the end of the month, Adriana finished teaching $10,000 worth of cooking classes.

c. During the month, Adriana purchased supplies for her cooking classes such as meats and cheese for $5,000. At the end of the month, a physical count shows that $1,000 of supplies are left.

d. On September 1, Adriana purchased a refrigerator costing $2,400. This equipment will be used for 5 years and then donated to the food bank.

e. Adriana was hired to teach at a food festival. She taught the “Secrets to Italian Cooking” on September 30 and sent the festival organizers an invoice for $9,350. The invoice was paid in full on October 15, 2023.

f. Adriana will pay salaries of $3,360 for two weeks (14 days) on October 9, 2023. At the end of the month, nine days of salaries are unpaid and unrecorded.

Required: For transactions a to f, help Adriana prepare the adjusting entries on September 30, 2023. I need account titles and explanation for each question. I need to put it neatly onto an Excel sheet so please keep answers where it needs to be.

Answer 1

a. Interest Expense:

Adjusting Entry:

Debit: Interest Expense $250 ([$60,000 * 5%] / 12)

Credit: Interest Payable $250

b. Cooking Classes Revenue:

Adjusting Entry:

Debit: Unearned Cooking Classes Revenue $30,000 (Liability)

Credit: Cooking Classes Revenue $10,000 (Recognizing revenue earned)

c. Supplies Expense:

Adjusting Entry:

Debit: Supplies Expense $4,000 ([$5,000 - $1,000] supplies used)

Credit: Supplies $4,000

d. Depreciation Expense (Equipment):

Adjusting Entry:

Debit: Depreciation Expense $40 ([($2,400 / 5 years) / 12 months] * 1 month)

Credit: Accumulated Depreciation $40

e. Accounts Receivable and Service Revenue:

Adjusting Entry:

Debit: Accounts Receivable $9,350

Credit: Service Revenue $9,350

f. Salaries Expense:

Adjusting Entry:

Debit: Salaries Expense $2,400 ([($3,360 / 14 days) * 9 days])

Credit: Salaries Payable $2,400