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1.Weez Ltd began operations on 1 July 2020, with monthly accounting periods. When it purchased supplies during July, Weez Ltd debited Supplies Expense, yet at the end of July, a material amount of supplies remained on hand, and their dollar amount was estimated. You, the newly hired accountant, have been assigned to prepare the suggested adjusting journal entry. Required: Prepare a residual analysis justifying the necessary adjusting journal entry, including the accounts to be debited and credited. Format your answer by copying and pasting the following bold face into the answer box provided; however, please do not use bold face in your answer itself. Please do not exceed 200 words. Effect on assets and explanation: Effect on liabilities and explanation: Effect on equity and explanation: Account to debit and account to credit:
2.Zhao Co. has fixed costs of $429,000. Its single product sells for $187 per unit, and variable costs are $122 per unit. Compute the level of sales in units needed to produce a target (pretax) income of $130,000.
1.Effect on assets and explanation:
When supplies are purchsed jouranl entry should be supplies account is debited and cash account or accounts payable is credited but in the present case instead of debiting supplies account, supplies expense account is debited which results in under recording of assets.
Hence, supplies account must be debited to increase the balance of the assets side.
Effect on liabilities and explanation:
Liability towards the creditor will remains the same and hence, doesn't get effected.
Effect on equity and explanation:
As supplies expense get reduced to the extent it exceed from the actual usage during the month and such reduction in expense will results in increased profit. Finally, the equity shareholder's account will be increased because of the increase in the profit.
Account to debit and account to credit:
Supplies Dr.
To Supplies expense
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