REGULAR TRANSACTIONS and ADJUSTMENTS FOR MARCH
The accounting period is one month, so adjustments are done monthly.
This means that the company plans to issue and IS, OE and BS
at the end of each month as well.
REGULAR TRANSACTIONS FOR MARCH
1-Mar Johnson pays $12,000 for office rent, in advance. This represents
12 months of rent, at $1,000 per month. It is paid in cash.
1-Mar Johnson purchases Equipment for $36,000 and issues a note
payable. The equipment is estimated to last for 3 years.
The note, for $36,000, will be paid off in one year.
1-Mar Johnson pays $3,000 cash for supplies.
1-Mar Johnson receives a cash payment from Smith--of $16,000--for
services to be rendered to Smith later this month.
ADJUSTMENTS FOR THE MONTH OF MARCH
31-Mar Record the portion of the Prepaid Rent that has been used up
in March.
31-Mar Record the depreciation on the Equipment
31-Mar A count of Supplies reveals that there are $1,000 of Supplies
left on the shelf.
31-Mar Johnson actually provided $10,000 of services to Smith this month.
31-Mar Johnson normally pays the two employees (Chris and Billie)
$500 per week (each). Payday is every two weeks. They were
paid in cash on the 16th of March (already recorded). However,
on March 31, the employees have worked 2 weeks; Johnson owes
each employee $1,000.
31-Mar The $36,000 note payable has an interest rate of 6% per year.
One month's interest has accrued (piled up).
36000*.06*1/12 = $180 of accrued interest for March.
Note: no cash will be paid for interest until the due date--March 1
of next year.
March 25-31 From March 25-31, Johnson provided consulting to various customers,
in the amount of $12,000--but the invoices have not been prepared
yet. However, the services have been provided, so there is
$12,000 of accrued revenue to be recorded.
31-Mar Johnson estimates that some of its accounts receivable may be
uncollectible. This happens in life. Johnson calculates that
about $500 of its accounts receivable are uncollectible.
Note: this is a chapter 9 item.