Question

he following information relates to the Oriole Company at the end of 2020. The accounting period is the calendar year.

1.		Employees are paid every Friday for the five-day week ending on that day. Salaries amount to $2,400 per week. The accounting period ends on a Tuesday.
2.		A note for $4,900 was received from a customer in a sales transaction on April 1, 2020. The note matures in one year and bears 8% interest.
3.		On September 1, 2020, Oriole borrowed $7,500 cash by signing a note payable due in one year at 7% interest.

Using the information given above, prepare the necessary adjusting entries at December 31, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Answer 1

SOLUTION 1:
		Caclulation of Salary Payable as on Year End
		Salary Payable every Week	$                             2,400
		No. of Days Expired in period end week	2 Days
		Salary Payable = $ 2,400 X 2 Days / 5 Days =	$                                 960
	Journal Entries
	Date	Account Title and explanation	Debit	Credit
	Dec 31. 2020	Salary Expenses	$                                 960
		Salary Payable		$                      960
		(To Recordh the salary Expenses of year end)
SOLUTION 2:
		Calculation of interest receivable on note
		Note Value	$4,900
		Interest = $ 4,900 X 8% X 9 /12 Months =	$294
	Journal Entries
	Date	Account Title and explanation	Debit	Credit
	Dec 31. 2020	Interest Receivable	$                                 294
		Interest Revenue		$                      294
		(To Record the interest revenue)
SOLUTION 3:
		Calculation of interest payable on note
		Par Value of note	7500
		Interest = $ 7,500 X 7% X 4 / 12 Month)	175
	Journal Entries
	Date	Account Title and explanation	Debit	Credit
	Dec 31. 2020	Interest Expenses	$                                 175
		Interest Payable		$                      175
		(To Record the interest expenses as on Dec 31)