Question

Charger Inc. had the following items that require adjusting entries at the end of the year. a. Charger pays its employees $3,000 every Friday for a 5-day work week. This year December 31 falls on a Wednesday. b. Charger earned income of $720,000 for the year for tax purposes. Its effective tax rate is 35%. These taxes must be paid by April 15 of next year. C. Charger borrowed $360,000 with a note payable dated August 1. This note specifies 6%. The interest and principal are due on March 31 of the following year. d. Charger's president earns a bonus equal to 15% of income in excess of $610,000. Income for the year was $720,000. This bonus is paid in May of the following year and any expense is charged to wages expense. Required: Prepare the adjusting journal entries to record these transactions at the end of the current year.

Answer 1

					BALANCE SHEET			INCOME STATEMENT
Date	Account Title	Post Ref.	Debit	Credit	Assets	Liabilities	Equity	Revenue	Expenses	Net Income
a	Wages Expense		$1,800						$1,800	-$1,800
	Wages Payable			$1,800		$1,800
	(To record accrued wages) ($3,000 x 3/5)
b	Income Tax Expense		$252,000						$252,000	-$252,000
	Income Tax Payable			$252,000		$252,000
	(To record accrued income taxes) ($720,000 x 35%)
c	Interest Expense		$9,000						$9,000	-$9,000
	Interest Payable			$9,000		$9,000
	(To record accrued interest) ($360,000 x 6% x 5/12)
d	Wages Expense		$16,500						$16,500	-$16,500
	Wages Payable			$16,500		$16,500
	(To record accrued wages) [($720,000 - $610,000) x 15%]