Adjustments Kretz Corporation prepares monthly financial sta

Adjustments

Kretz Corporation prepares monthly financial statements and therefore adjusts its accounts at the end of every month. The following information is available for March 2017:

Required:

1. For each of the following situations, identify and analyze the adjustments to be recorded on March 31, 2017. Do not round intermediate calculations. If required, round your final answers to the nearest dollar.

a. Kretz Corporation takes out a 90-day, 8%, $15,000 note on March 1, 2017, with interest and principal to be paid at maturity. Assume 360 days a year.

b. The asset account Office Supplies on Hand has a balance of $1,280 on March 1, 2017. During March, Kretz adds $750 to the account for purchases during the period. A count of the supplies on hand at the end of March indicates a balance of $1,370.

c. The company purchased office equipment last year for $62,600. The equipment has an estimated useful life of six years and an estimated salvage value of $5,000. Use straight line method of depreciation.

How does this entry affect the accounting equation? If a financial statement item is not affected, select \"No Entry\" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item.

d. The company’s plant operates seven days per week with a daily payroll of $950. Wage earners are paid every Sunday. The last day of the month is Friday, March 31.

How does this entry affect the accounting equation?

If a financial statement item is not affected, select \"No Entry\" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.

e. The company rented an idle warehouse to a neighboring business on February 1, 2017, at a rate of $2,500 per month. On this date, Kretz Corporation recorded Rent Collected in Advance for six months’ rent received in advance.

f. On March 1, 2017, Kretz Corporation recorded a liability account, Customer Deposits, for $4,800. This sum represents an amount that a customer paid in advance and that Kretz will earn evenly over a four-month period.

g. Based on its income for the month, Kretz Corporation estimates that federal income taxes for March amount to $3,900

2. Assume that Kretz reports income of $23,000 before any of the adjustments. What net income will Kretz report for March?

Balance Sheet

Income Statement

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Assets

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Expenses

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Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. Part-1 a. Interest for the month 15000*8%*30/360 100 b. Supplies Expense (1280+750-1370) -660 c. Depreciation for the month (62600-5000)/6/12 800 d. Salaries for 5 days (Mon to Fri) 950/7*5 679 e. Rent for the month of March 2500 f. Revenue earned in March 4800/4 1200 Asset Liabilities Equity Revenue Expense Net Income a Interest Payable 100 Interest Expense 100 -100 b1 Office Supplies 750 Accounts Payable 750 b2 Office Supplies -660 Supplies Expense 660 -660 c Accumulated Depreciation 800 Depreciation Expense 800 -800 d Salaries and wages payable 679 Salaries and wages expense 679 -679 e Prepaid Rent -2500 Rent Revenue 2500 2500 f1 Cash 4800 Unearned Revenue 4800 f2 Unearned Revenue -1200 Sales Revenue 1200 1200 g Income Tax Payable 3900 Income Tax Expense 3900 -3900 Part-2 Net income before adjustment 23000 add: Rent Revenue 2500 add: Sales Revenue 1200 Less: Expenses: Interest -100 Supplies -660 Depreciation -800 Salaries and Wages -679 Income Tax -3900 Net Income after adjustment 20561

Adjustments Kretz Corporation prepares monthly financial statements and therefore adjusts its accounts at the end of every month. The following information is a

Adjustments Kretz Corporation prepares monthly financial sta

Solution

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