Nathan Corporation's equipment had an original life of 140 months, and the straight-line depreciationmethod is used. As of January 1, the equipment was 40 months old. The equipment will be worthless at theend of its useful life.As of the end of the month, Asher Corporation has provided services to customers for which the earningsprocess is complete. Formal billings are normally sent out on the first day of each month for the priormonth's work. January's unbilled work is $75,000.Utilities used during January, for which bills will soon be forthcoming from providers, are estimated at$4,500.A review of supplies on hand at the end of the month revealed items costing $10,500.The $7,200 balance in prepaid insurance was for a 6-month policy running from January 1 to June 30.The unearned revenue was collected in December of 20X7. 60% of that amount was actually earned inJanuary, with the remainder to be earned in February.The loan accrues interest at 1% per month. No interest was paid in January. Nathan Goldstien's administrative assistant maintains a very simple computerized general ledger system.This system includes intuitive routines for recording receipts, payments, and sales on account. However,the system is not sufficiently robust to automate end-of-period adjustments. Below is the trial balance forthe month ending January 31, 20X8. This trial balance has not been adjusted for the various items that aredescribed on the following page. Review the trial balance and narratives, and prepare the necessary adjustingentries.NATHAN CORPORATIONTrial BalanceJanuary 31, 20X8DebitsCredits112,500 $Cash|Accounts ReceivablePrepaid InsuranceSuppliesEquipmentAccumulatedDepreciationAccounts PayableUnearned RevenueLoan Payable37,2307,20021,339105,00030,00022,70725,50045,00072,00046,371Capital StockRetained Earmings, Jan. 1RevenuesSalary ExpenseRent ExpenseOffice Expense131,98536,29439,0007,500Dividends7,500373,563373,563

Name: Nathan Corporation's equipment had an original life of 140 months, an
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Description: Nathan Corporation's equipment had an original life of 140 months, and the straight-line depreciationmethod is used. As of January 1, the equipment was 40 months old. The equipment will be worthless at theend of its useful life.As of the end of the

The adjustment entries are prepared to adjust the revenue and expenses of the current period.

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Nathan Corporation's equipment had an original life of 140 months, and the straight-line depreciation method is used. As of January 1, the equipment was 40 months old. The equipment will be worthless at the end of its useful life. As of the end of the month, Asher Corporation has provided services to customers for which the earnings process is complete. Formal billings are normally sent out on the first day of cach month for the prior month's work. January's unbilled work is $75,000. Utilities used during January, for which bills will soon be forthcoming from providers, are estimated at $4,500. A review of supplies on hand at the end of the month revealed items costing $10,500. The $7,200 balance in prepaid insurance was for a 6-month policy running from January 1 to June 30. The unearned revenue was collected in December of 20X7. 60% of that amount was actually earned in January, with the remainder to be earned in February. The loan accrues interest at 1% per month. No interest was paid in January.

Nathan Corporation's equipment had an original life of 140 months, and the straight-line depreciation method is used. As of January 1, the equipment was 40 months old. The equipment will be worthless at the end of its useful life. As of the end of the month, Asher Corporation has provided services to customers for which the earnings process is complete. Formal billings are normally sent out on the first day of cach month for the prior month's work. January's unbilled work is $75,000. Utilities used during January, for which bills will soon be forthcoming from providers, are estimated at $4,500. A review of supplies on hand at the end of the month revealed items costing $10,500. The $7,200 balance in prepaid insurance was for a 6-month policy running from January 1 to June 30. The unearned revenue was collected in December of 20X7. 60% of that amount was actually earned in January, with the remainder to be earned in February. The loan accrues interest at 1% per month. No interest was paid in January.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

Topic Video

Question

Nathan Corporation's equipment had an original life of 140 months, and the straight-line depreciation
method is used. As of January 1, the equipment was 40 months old. The equipment will be worthless at the
end of its useful life.
As of the end of the month, Asher Corporation has provided services to customers for which the earnings
process is complete. Formal billings are normally sent out on the first day of each month for the prior
month's work. January's unbilled work is $75,000.
Utilities used during January, for which bills will soon be forthcoming from providers, are estimated at
$4,500.
A review of supplies on hand at the end of the month revealed items costing $10,500.
The $7,200 balance in prepaid insurance was for a 6-month policy running from January 1 to June 30.
The unearned revenue was collected in December of 20X7. 60% of that amount was actually earned in
January, with the remainder to be earned in February.
The loan accrues interest at 1% per month. No interest was paid in January.

Nathan Goldstien's administrative assistant maintains a very simple computerized general ledger system.
This system includes intuitive routines for recording receipts, payments, and sales on account. However,
the system is not sufficiently robust to automate end-of-period adjustments. Below is the trial balance for
the month ending January 31, 20X8. This trial balance has not been adjusted for the various items that are
described on the following page. Review the trial balance and narratives, and prepare the necessary adjusting
entries.
NATHAN CORPORATION
Trial Balance
January 31, 20X8
Debits
Credits
112,500 $
Cash
|Accounts Receivable
Prepaid Insurance
Supplies
Equipment
Accumulated
Depreciation
Accounts Payable
Unearned Revenue
Loan Payable
37,230
7,200
21,339
105,000
30,000
22,707
25,500
45,000
72,000
46,371
Capital Stock
Retained Earmings, Jan. 1
Revenues
Salary Expense
Rent Expense
Office Expense
131,985
36,294
39,000
7,500
Dividends
7,500
373,563
373,563

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