Assume the year runs from January 1 to December 31 for the Year2018. On...

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Accounting

Assume the year runs from January 1 to December 31 for the Year2018. On May 1, Company DEF (“The Company”) purchased inventoriescosting $49,000; the Company paid $29,000 in cash and giving aone-year, 9% note for the balance; accrual of interestexpense. On August 1, The Company received $6,000 cashfor legal services to be performed evenly throughout the six monthsperiod (starting on August 1); and the Company started renderingthe legal services on August 1. On November 1, The Company paid$5,400 in cash for one year of the rent in advance.
Prepare the journal entries to record the above transactions onMay 1, August 1, and November 1 in box .
Prepare the adjusting entries at 31 December 2018 related to theabove transactions in box . Assume straight-line amortizationmethod is applied.
Prepare the journal entries to record the payment of the note onthe maturity date in box .
Indicate the manner in which the above transactions should bereflected in the Current Liabilities section of The Company'sStatement of Financial Position at 31 December 2018 in box

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Answer :

Journal Entries

Date	Account Titles	Debit	Credit
May-01	Inventory	$ 49,000
	Cash		$ 29,000
	Notes Payable		$ 20,000
(Purchase of inventory)
Aug-01	Cash	$ 6,000
	Unearned Service Revenue		$ 6,000
(Cash received for services to be rendered)
Nov-01	Prepaid Rent	$ 5,400
	Cash		$ 5,400
(Rent paid in advance for one year)

Adjusting Entries

Date	Account Titles	Debit	Credit	Explanation
Dec-31	Interest Expense	$ 1,200		*=200009%8/12*
	Interest Payable		$ 1,200
(Interest accrued on note for 8 months)
Dec-31	Unearned Service Revenue	$ 5,000		*=60005/6**
	Service Revenue		$ 5,000
(Service Revenue recognized for services rendered)
Dec-31	Rent Expense	$ 900		*=5400/122**
	Prepaid Rent		$ 900
(Rent expense recorded)

Maturity date

Date	Account Titles	Debit	Credit	Explanation
Apr-30	Notes Payable	$ 20,000
	Interest Payable	$ 1,200
	Interest Expense			*=200009%4/12*
	Cash		$ 21,200
(Note paid on maturity)

Current Liabilities
Unearned Service Revenue	$ 1,000
Notes Payable	$ 20,000
Interest Payable	$ 1,200
Total Current Liabilities	$ 22,200

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Transcribed Image Text

In: AccountingAssume the year runs from January 1 to December 31 for the Year2018. On May...Assume the year runs from January 1 to December 31 for the Year2018. On May 1, Company DEF (“The Company”) purchased inventoriescosting $49,000; the Company paid $29,000 in cash and giving aone-year, 9% note for the balance; accrual of interestexpense. On August 1, The Company received $6,000 cashfor legal services to be performed evenly throughout the six monthsperiod (starting on August 1); and the Company started renderingthe legal services on August 1. On November 1, The Company paid$5,400 in cash for one year of the rent in advance.Prepare the journal entries to record the above transactions onMay 1, August 1, and November 1 in box .Prepare the adjusting entries at 31 December 2018 related to theabove transactions in box . Assume straight-line amortizationmethod is applied.Prepare the journal entries to record the payment of the note onthe maturity date in box .Indicate the manner in which the above transactions should bereflected in the Current Liabilities section of The Company'sStatement of Financial Position at 31 December 2018 in box