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The ledger of Tamarisk, Inc. on July 31, 2017, includes the selected accounts below before…

Question:

The ledger of Tamarisk, Inc. on July 31, 2017, includes the selected accounts below before adjusting entries have been prepared.

DebitCredit
Investment in Note Receivable Y Prepaid Rent$12,000
Supplies23,000
Prepaid Rent5,800
Buildings210,000
Accumulated Depreciation-Buildings$140,000
Unearned Service Revenue10,500

An analysis of the company’s accounts shows the following.

1. The investment in the notes receivable earns interest at a rate of 6% per year,

2. Supplies on hand at the end of the month totaled $17,600.

3. The balance in Prepaid Rent represents 4 months of rent costs.

4. Employees were owed $2,900 related to unpaid salaries and wages

5. Depreciation on buildings is $6,000. per year.

6. During the month, the company satisfied obligations worth $4,550 related to the Unearned Services Revenue.

7. Unpaid maintenance and repairs costs were $2,300.

Prepare the adjusting entries at July 31 assuming that adjusting entries are made monthly.

Adjusting Journal Entries:

Adjusting journal entries are recorded at the end of an accounting period to ensure that account balances are consistent with the accrual basis of accounting, which is required under generally accepted accounting principles (GAAP). Financial statements are prepared only after adjusting entries are completed.

Answer and Explanation:

DateGeneral JournalDebitCredit
7/31Interest receivable60
Interest revenue (12,000 x 6% x 1/12)60
7/31Supplies expense5,400
Supplies (23,000 – 17,600)5,400
7/31Rent expense (5,800 x 1/4)1,450
Prepaid rent1,450
7/31Salaries and wages expense2,900
Salaries and wages payable2,900
7/31Depreciation expense (6,000 x 1/12)500
Accumulated depreciation500
7/31Unearned service revenue4,550
Service revenue4,550
7/31Repairs and maintenance expense2,300
Repairs and maintenance payable2,300

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