Question

P3.3 (L03) (Adjusting Entries) A review of the ledger of Baylor Company at December 31, 2020, produces the following data pertaining to the preparation of annual adjusting entries. 1. Salaries and Wages Payable $0. There are eight employees. Salaries and wages are paid every Friday for the current week. Five employees receive $700 each per week, and three employees earn $600 each per week. December 31 is a Tuesday. Employees do not work weekends. All employees worked the last 2 days of December 2. Unearned Rent Revenue $429,000. The company began subleasing office space in its new building on November 1. Each tenant is required to make a $5,000 security deposit that is not refundable until occupancy is terminated. At December 31, the company had the following rental contracts that are paid in full for the entire term of the lease. Date Term (in months) 6 6 Monthly Rent $6,000 $8,500 Number of Leases 5 4 Nov. 1 Dec. 1

Answer 1

Adjusting Entries
S.no.	Accounts title and explanations		Debit $	Credit $
a.	Salaries and wages expense		2,120
	Salaries and wages payable			2,120
	(for salaries accrued for 2 days)
	(700*5+3*600)*2/5
b.	Unearned Rent revenue		58,000
	Rental revenue				58,000
	(for rental revenue recognized for expired period)
	(5*6000*2 months + 4*8500*1 month)
c.	Advertisement expense		4,900
	Prepaid Advertisement account		4,900
	(for expense recognized for expired period)
	(6000*8/12 + 7200*3/24)
d.	Interest expense			4,200
	Interest payable				4,200
	(for interest due on notes payable for 7 months)
	(60,000*12%*7/12)