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. Activity Operating Accounts Statement(s) 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. Balance Sheet Stockholders' Assets Liabilities + Equity Revenues 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. Activity Accounts Statement(s) 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. Balance Sheet Stockholders' Assets Liabilities + Equity Revenues 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. Activity Accounts Statement(s) 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. Balance Sheet Stockholders' Assets = Liabilities + Equity Revenues arners are paid every Sunday. The last day of the d. The company's plant operates seven days per week with a daily payroll of $950. Wage month is Friday, March 31. Activity Accounts Statement(s) 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. Balance Sheet Stockholders' Assets Liabilities + Equity Revenues 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. Activity Accounts Statement(s) How does this entry affect the accounting ouation 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. Balance Sheet Stockholders' Assets Liabilities + Equity Revenues 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. Activity Accounts Statement(s) 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. Balance Sheet Stockholders' Assets Liabilities + Equity Revenues g. Based on its income for the month, Kretz Corporation estimates that federal income taxes for March amount to $3,900. Activity Accounts Statement(s) 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. 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. Balance Sheet Stockholders' Assets = Liabilities + Equity Revenues 2. Assume that Kretz reports income of $23,000 before any of the adjustments. What net income will Kretz report for March? $
