Response to the following :
1. On January 2, 20X2, Mechanical Engineers, Inc. borrowed $30,000, at an annual interest rate of 5%, which was recorded as a long-term note payable (principal will be paid on January 2, 20X4). Interest on the note payable will be paid monthly on the first of each month beginning February 1, 20X2. What adjusting journal entry is necessary on January 31, 20X2?
a. Debit: Interest expense..............1,500
Credit: Interest payable.......................1,500
b. Debit: Interest payable..............1,500
Credit: Interest expense......................1,500
c. Debit: Interest payable................125
Credit: Interest expense.........................125
d. Debit: Interest expense................125
Credit: Interest payable.........................125
2. On October 1, 20X7, XYZ Co. paid rent in advance for office space of $72,000 for the next 8 months (from October 1, 20X7 through May 31, 20X8), recording the entire rental payment as prepaid rent on the purchase date. If adjusting entries are made monthly, what adjusting journal entry is needed on November 30, 20X7?
a. Debit: Rent expense.......................9,000
Credit: Prepaid rent......................9,000
b. Debit: Rent expense...........................9,000
Credit: Cash...............................9,000
c. Debit: Rent expense........................72,000
Credit: Cash..............................72,000
d. Debit: Rent expense.....................72,000
Credit: Prepaid rent.......................72,000
3. On January 1, 20X3, Emily's Boutique purchased equipment for $170,000 that is expected to have a 10 year useful life and a $20,000 salvage value. Straight-line depreciation is used. Adjusting entries are made monthly. What is the adjusting entry for depreciation expense for the month ending December 31, 20X3?
a. Debit: Depreciation expense: equipment......................17,000
Credit: Accumulated depreciation: equipment.............17,000
b. Debit: Depreciation expense: equipment.......................15,000
Credit: Accumulated depreciation: equipment............15,000
c. Debit: Depreciation expense: equipment........................1,417
Credit: Accumulated depreciation: equipment..............1,417
d. Debit: Depreciation expense: equipment........................1,250
Credit: Accumulated depreciation: equipment..............1,250
Questions 4through 10 that follow are based on the following December 31, 20X6 year-end account balances for XYZ Co. after adjusting entries had been prepared but before the books were closed for the year.
Cash...................................................566,000
Accounts receivable.................................596,500
Prepaid insurance......................................22,100
Prepaid rent............................................47,000
Office supplies........................................19,500
Equipment............................................450,000
Accumulated depreciation: equipment............140,000
Land...................................................384,800
Accounts payable....................................284,200
Dividends payable.................................... 40,000
Interest payable.........................................10,000
Income tax payable.....................................12,500
Unearned client service revenue......................30,000
Notes payable (due December 20X9)..............350,000
Common stock.........................................860,000
Retained earnings......................................280,200
Dividends.................................................65,000
Client service revenue..................................850,000
Travel expense............................................30,500
Office supplies expense.................................20,300
Advertising expense.....................................24,600
Salary expense...........................................385,000
Utility expense.............................................19,800
Depreciation expense: equipment......................25,000
Interest expense...........................................17,500
Insurance expense..........................................22,500
Rent expense..............................................63,000
Income tax expense.......................................97,800
4. Prepare the adjusted trial balance on December 31, 20X6.
5. Prepare the income statement for the year ended December 31, 20X6.
6. Prepare the statement of retained earnings for the year ended December 31, 20X6.
7. Prepare the statement of financial position as of December 31, 20X6.
8. Determine the working capital on December 31, 20X6.
9. Determine the current ratio on December 31, 20X6.
10. Determine the acid-test (quick) ratio on December 31, 20X6.