1. Salaries Payable $0.There are eight salaried employees. Salaries are paid every Friday for the current week. Five employees receive a salary of $800 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 $324,000. The company began subleasing office space in its new building on November 1. 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) Monthly Rent Number of
Leases
Nov. 1 6 $4,000 5
Dec. 1 6 8,500 4
3. Prepaid Advertising $15,000.This balance consists of payments on two advertising contracts. The contracts provide for monthly advertising in two trade magazines. The terms of the contracts are as follows.
Contact Date Amount Number of magazines issues
A650 May 1 $5,400 12
B974 Oct.1 9,600 24
The first advertisement runs in the month in which the contract is signed.
4. Notes Payable $120,000.This balance consists of a note for one year at an annual interest rate of 9%, dated June 1.
Instructions
Prepare the adjusting entries at December 31, 2008. (Show all computations.)
Preparing adjusting entries. (SO 5, 6)
1. Salaries expense $2,320
2. Rent revenue $74,000
3. Advertising expense $4,800
4. Interest expense $6,300 SOLUTION
