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Q1) Arista Company adjusts its accounts at the end of each month. Following information has been assembled in order to create required adjusting entries at December 31:

A one-year bank loan of $360,000 at annual interest rate of 12% had been obtained on December 1.

Company's pays all employees up-to-date each Friday. Since December 31 fell on Tuesday, there was a liability to employees at December 31 for two day's pay amounting to $5,900.

On December 1 rent on office building had been paid for four months. Monthly rent is $3,000.

Depreciation of office equipment is based on lifetime of six years. Balance in Office Equipment account is $7,200; no change has occurred in account during year.

Fees of $7,600 were earned in the month for clients who had paid in advance.


A. Compute amount of interest expense has accrued on bank loan?

B. By what amount will book value of office equipment decline after suitable December adjustment is recorded?

C. After suitable adjusting entry is recorded, balance in liability account Unearned Fees will fall by what amount?

D. What will be the suitable entry to record rent expense?

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M921766

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