ACCTG 180¬_W04 problems_assets-liabilities fi nancial_statement_analysis| Questions and answers | Updated A+ | 2026

Jones Surf Shop is ready to expand their operations and wants to buy some equipment to perform repair
equipment. Help Jeremy make some decisions about how to record the purchases and calculate deprecia




On April 1 Jeremy has placed an order for a surf board repair machine that will be housed in the backroo
paid cash for the machine and it cost $15,000. He expects that the machine will have a useful life of 5 ye
be able to sell it at the end for about $2500. Complete the journal entry for the purchase of the machine.


JOURNAL
Date Description Debit
April 1, 2024 Equipment $ 15,000
Cash
Purchase of Surf Board Repair Machine


After talking with Jeremy about the uses of the machine you have decided that straight line depreciation
Calculate what the annual depreciation for the machine will be under the straight line depreciation meth


Straight Line Deprecation Schedule
Book Value $ 15,000
Useful Life (in years) 5
Salvage (Residual) Value $ 2,500
Depreciable Base $ 12,500


Depreciation Amount per year $ 2,500
Depreciation Amount per Month $ 208.33



As of April 30, journalize the depreciation entry for April, the first month the asset is put into service.

JOURNAL
Date Description Debit
April 30, 2024 Depreciation Expense $ 208.33
Accumulated Depreciation
Depreciation Expense of surfboard machine

,Sally's Surf Pros has reached out to Jeremy about setting up some prepaid repair work for her competitiv
would like to prepay for ten tune-ups to get a discounted rate. Jeremy agrees to a price of $200 per tune
April 15 Sally pays cash for the $2000 prepaid tuneups.

Journalize the receipt of the prepaid revenue

JOURNAL
Date Description Debit
April 15, 2024 Cash $ 2,000
Unearned Revenue
Purchase of surf board repair machine


One of Sally's pros comes in on April 25 to use one of the prepaid tuneups. Record the journal for comple

JOURNAL
Date Description Debit
April 25, 2024 Unearned Revenue $ 200
Service Revenue
Revenue to the service




With the increase in operations Jeremy has decided to take out some debt to help finance the growth. He
Valley Bank and they have agreed to a bank loan in the amount of $100,000 on April 1. The terms of the
repayment of principal at the end of 5 years. The annual interest rate on the loan is 8%, recognized mont

Journalize the receipt of the cash from the loan

JOURNAL
Date Description Debit
April 1, 2024 Cash $ 100,000
Notes Payable
Receipt of cash from loan

Calculate the interest recognized monthly.

Principal (Amount Borrowed) $ 100,000
Interest Rate 8%
Period of Time 1/12

, Monthly Interest Rate $ 666.67

Create the journal to record the interest for the first month of interest

JOURNAL
Date Description Debit
April 30, 2024 Interest Expense $ 667
Interest Payable
First month of interest



Below are the end of period statements for Jones Surf Shop - Help Jeremy do some financial statement analysis on


Jones Surf Shop
Multi-Step Income Statement
For Month Ended April 30
Service Sales $40,000
Retail Sales $25,000
Total Sales (Revenue) $65,000
Less:
Sales Discount $1,500
Net Revenue $63,500

Cost of Goods Sold $15,250

Gross Margin $48,250
Operating Expenses (Record Accounts Alphabetically)
Advertising Expense $1,500
Depreciation Expense $208
Rent Expense $1,500
Utilities Expense $1,300
Salaries Expense $10,575
Supplies Expense $100
Total Operating Expenses $15,183
Earnings before Interest and Taxes $33,067
Interest Expense $667
Income Tax Expense $2,500
Net Income $29,900



Jones Surf Shop
Balance Sheet