ACCT chp 3 HW Q 11-14

Midwest Enterprises made the following entry on December 31, 2012. Interest Expense 10,000 Interest Payable 10,000 (To record interest expense due on loan from Anaheim National Bank.) What entry would Anaheim National Bank make regarding its outstanding loan to Midwest Enterprises? Explain why this must be the case

Anaheim National Bank would make the following entry regarding outstanding loan: interest receivable...$10000 Interest Revenue.....................$10000 (Being interest receivable) Because the National bank has to receive interest on loan so it is a current assets as well as income.

Jay Hawk, maintenance supervisor for Boston Insurance Co., has purchased a riding lawnmower and accessories to be used in maintaining the grounds around corporate headquarters. He has sent the following information to the accounting department. Cost of mower and Date purchased 7/1/12 accessories $4,000 Monthly salary of Estimated useful life 5 yrs groundskeeper $1,100 Salvage value $0 Estimated annual fuel cost $150 Compute the amount of depreciation expense (related to the mower and accessories) that should be reported on Boston's December 31, 2012, income statement. Assume straight-line depreciation.

Date of purchased = 1st July 2012 Cost of Machinery = $4000 Depreciation for 6month should be reported in Income statement. Deprecation for a year (Straight Line Method) = (Cost of machinery-salvage value)/Estimated useful life = ($4000-$0)/5 = $800 Deprecation for a year is $800 so deprecation for 6 month $400 Deprecation should be reported in books $400

what are adjusting entries and why are they necessary?

adjusting entries are prepared prior to the preparation of financial statements in order to bring the accounts up to date and are necessary 1) to achieve a proper matching of revenues and expenses in measuring income and 2) to achieve an accurate presentation of assets, liabilities and stockholders' equity

what are closing entries and why are they necessary?

closing entries are prepared to transfer the balances of nominal accounts to capital (retained earnings) after the adjusting entries have been recorded and the financial statements prepared. Closing entries are necessary to reduce the balances in nominal accounts to zero in order to prepare the accounts for the next period's transactions