Question

Chen Ltd requires help with a few journal entries relating to liabilities. The business has monthly accounting periods, and the adjusting entries are for the month ending 31 March 2020. a) On 1 February 2020, Chen Ltd borrowed $10,000, agreeing to repay that amount, with interest, over a 12- month period. The terms of the loan required $900 monthly payments due on the first of each month consisting of part interest, part principal repayment calculates interest at 1% per month on the outstanding principal. Chen Ltd correctly journalised the 1 March payment. Required: The bank Prepare the required adjusting journal entry on 31 March 2020. Prepare the journal entry for the $900 payment on 1 April 2020. i b) On Friday, 27 March 2020, Chen Ltd correctly journalised the wage payments to its employees of $9,800 and to the IRD for the associated PAYE of $2,940. These amounts represented 10 working days. The next payroll and IRD pay date will be in April; however, even though the business is closed on weekends, all employees worked 30 and 31 March Required Prepare the required adjusting journal entry on 31 March 2020. i. Prepare the journal entry for the next payroll and IRD payments in April, again assuming payment for 10 working days. ii. c) Chen Ltd offers a one-year repair warranty on its products. At the end of each month, the business updates its Warranty Provision account with an adjusting journal entry. On 31 March 2020, the Warranty Provision account had a $5,800 credit balance. The total number of units sold during the past 12 months were 4,000, and Chen Ltd expects 3% of those units to require repairs from 1 April going forward. Chen Ltd also estimates April sales at 350 units and expects 2% of those units to require repairs. On average, the repairs, outsourced to Lew Ltd, cost $50. Required: Prepare the required adjusting journal entry on 31 March 2020 Ignore GST. i. Prepare the April journal entry for a $300 payment to Lew Ltd for ii. repairs completed.

Answer 1

Date	Accounts title	Dr	Cr
a) 1	Interest expenses	$92
31-Mar-20	Interest payable		$92
		Repayment of		Outstnding balance
	EMI	Principal	Interest
1-Feb				$10,000
1-Mar	$900	$800	$100	$9,200
31-Mar	900	$808	$92	$8,392
a2)	Loan payable	$808
	Interest payable	$92
	Cash		$900
b)	Wages expenses (9800/10*4)	3920
	IRD expenses	1176
	Wages payable		3920
	IRD payable		1176
bii	Wages expenses (9800/10*6)	5880
	IRD expenses	1764
	Wages payable	3920
	IRD payable	1176
	Cash		12740
c1)	Warranty expenses	200
	Warranty provision		200
	(4000*3%*50)-5800
c2)	Warranty provision	300
	Cash		300
If any doubt please comment