Question

Greenock Limited has the following information available for accruals for the year ended December 31, 2019. The company adjusts its accounts annually. 1. The December utility bill for $425 was unrecorded on December 31, Greenock paid the bill on January 11. 2. Greenock is open 7 days a week and employees are paid a total of $3, 500 every Monday for a 7-day (Monday-Sunday) workweek. December 31 is a Thursday, so employees will have worked 4 days (Monday, December 28-Thursday, December 31) that they have not been paid for by year-end. Employees will be paid next on January 4. 3. Greenock signed a $45,000, 5% bank loan on November 1, 2018, due in 2 years. Interest is payable on the first day of each following month. 4. Greenock receives a fee from Pizza Shop next door for all pizzas sold to customers using Greenock's facility. The amount owed for December is $300, which Pizza Shop will pay on January 4. 5. Greenock rented some of its unused warehouse space to o client for $6,000 month, payable the first day of the following month. It received the rent for the month of December on January 2. For each situation, prepare the adjusting entry required at December 31. For each situation, prepare the journal entry to record the subsequent cash transaction in 2020.

Answer 1

Answer1. Account Titles and Explanation Debit 425 Date Credit Dec. 31, 2019 Utility Expense Dec. 31, 2019 Wages and Salaries Expense ($3,500/7*4) Dec. 31, 2019 | Interest Expense ($45,000*5%*1/12) Dec. 31, 2019 Accounts Receivable Dec. 31, 2019 Rent Receivable Utility Payable Wages and Salaries Payable Interest Payable 425 2,000 2,000 188 188 300 Service Revenue 300 6,000 Rent Revenue 6,000 Answer 2. Date Jan. 11, 2020 Utility Payable Account Titles and Explanation Debit 425 Credit Cash 425 Jan. 04, 2020 Wages and Salaries Expense ($3,500/7*2) 1,500 2,000 Wages and Salaries Payable Cash Interest Payable 3,500 Jan. 1, 2020 Jan. 4, 2020 Jan. 2, 2020 Cash 188 Cash Cash 188 300 Accounts Receivable 300 6,000 Rent Receivable 6,000

Answer 2

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