Prepare the adjusting entry to record the depreciation on equipment.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Bob’s Chocolate Chips and More, a bakery specializing in gourmet pizza and chocolate chip cookies, started business October 1, 20X1. The following transactions occurred during the month of October.
- Common stock of $90,000 was sold at par to start the business.
- Equipment consisting of mixers and ovens was acquired October 1 for $30,000 cash. The equipment is expected to last five years, after which it is expected to be sold for $5,000. Management uses the straight-line method to calculate
depreciation expense. - Ingredients costing $15,000 were purchased on account during the month and all but $5,000 was paid for by the end of the month.
- Rent is $500 a month. October, November, and December’s rent was paid October 5.
- A payment of $800 for utilities was made during the month.
- Sixty percent of the ingredients purchased in part c were prepared and sold for $35,000 on account; $26,000 was collected on
accounts receivable during the month. - Wages of $5,200 were paid during the month. Moreover, wages for the last three days of the month amounted to $400 and will be paid during the first week of November.
- Borrowed $12,000 from the bank for additional
working capital requirements, and $3,000 was repaid by month-end. Interest on the unpaid loan balance amounted to $450 at the end of October and was paid on November 5
Prepare the
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