Question

Exercise (2):

Javier Computer Services began operations in July 2017. At the end of the month, the company prepares monthly financial statements. It has the following information for the month.
1. At July 31, the company owed employees $1,300 in salaries that the company will pay in August.
2. On July 1, the company borrowed $20,000 from a local bank on a 10-year note. The annual interest rate is 12%.
3. Service revenue unrecorded in July totaled $2,400.
Required:
Prepare the adjusting entries needed at July 31, 2017.

Answer 1

Amount in $

Dr. Cr.

Salaries Expense 1,300

Salaries Payable 1,300

Salaries to be paid in august

Bank 20,000

Long term loan 20,000

Loan received from bank on a 10 year note

Interest Expense 200

Interest payable 200

Expense on loan for 10 years ( 20,000 *.12*1/12)

Revenue 2,400

Receivable 2,400

Unrecorded revenue

Step-by-step explanation:

1. Salaries are payable in august so a payable will be recorded for the amount. and an expense will be booked for the month.

2. Since this loan is for a period of more than 12 months so it will be treated as long term and interest on it will be calculated as mentioned above.

3. Unrecorded revenue will be recorded at mentioned above.