Question

Pharoah Company has the following information available for accruals for the year ended December 31, 2020. The company adjusts its accounts annually. 

1. The December utility bill for $525 was unrecorded on December 31. Pharoah paid the bill on January 11. 

2. Pharoah is open 7 days a week and employees are paid a total of $4,340 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. Pharoah signed a $55,800, 5% bank loan on November 1, 2019, due in 2 years. Interest is payable on the first day of each following month. 

4. Pharoah receives a fee from Pizza Shop next door for all pizzas sold to customers using Pharoah's facility. The amount owed for December is $370, which Pizza Shop will pay on January 4. (Hint: Use the Service Revenue account.) 

5. Pharoah rented some of its unused warehouse space to a client for $7,440 a month payable the first day of the following month. It received the rent for the month of December on January 2. 3. 4.

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 2021. 

Answer 1

Date	Account title	Debit	credit
December 31 2020`	Utilities expense	525
	Utilities payable		525
December 31 2020`	Salaries and wage expense	2480
	Salaries and wages payable		2480
	[Being salary accrued for 4 days out of 7days : 4340 *4/7 = 2480]
December 31 2020`	Interest expense	233
	Interest payable		233
	[Being interest accrued for 1 month (December ) :55800*.05*1/12 ]
December 31 2020`	Accounts receivable	370
	service revenue		370
December 31 2020`	Rent receivable	7440
	Rent revenue		7440

b)

Date	Account title	Debit	credit
Jan 11	Utilities payable	525
	cash		525
Jan 4	salaries and wages payable	2480
	cash		2480
Jan 1	Interest payable	233
	cash		233
Jan 4	Cash	370
	Accounts receivable		370
Jan 2	Cash	7440
	Rent receivable		7440