Question

For each of the following transactions for New Idea Corporation, give the accounting equation effects of the adjustments required at the end of the month on July 31:

a. Received a $510 utility bill for electricity usage in July to be paid in August.
b. Owed wages to 15 employees who worked two days at $55 each per day at the end of July. The company will pay employees at the end of the first week of August.
c. On July 1, loaned money to an employee who agreed to repay the loan in one year along with $660 for one full year of interest. No interest has been recorded yet.

Answer 1

first I will journalize the adjustments:

a. Received a $510 utility bill for electricity usage in July to be paid in August.

Dr Utilities expense 510

Cr Accounts payable 510

b. Owed wages to 15 employees who worked two days at $55 each per day at the end of July. The company will pay employees at the end of the first week of August.

Dr Wages expense 1,650

Cr Wages payable 1,650

c. On July 1, loaned money to an employee who agreed to repay the loan in one year along with $660 for one full year of interest. No interest has been recorded yet.

Dr Interest receivable 660

Cr Interest revenue 660

effects on the accounting equation:

Assets = Liabilities + Equity

a. 0 510 -510

b. 0 1,650 -1,650

c. 660 0 660

660 2,160 -1,500

Revenue - Expenses = Net income Cash flow

a. 0 510 -510 0 OA

b. 0 1,650 -1,650 0 OA

c. 660 0 660 0 OA

660 2,160 -1,500 0 NC