Recording Adjusting Entries (Accrued Accounts)

In each of the following transactions (a) through (c) for Romney’s Marketing Company, use the three step process illustrated in the chapter to record the adjusting entry at year-end December 31, 2012. The process includes (1) determining if revenue was earned or an expense incurred, (2) determining whether cash was received or paid in the past or will be received or paid in the future, and (3) computing the amount of the adjustment.

a. Estimated electricity usage at $380 for December; to be paid in January 2013.

b. On September 1, 2012, loaned $5,000 to an officer who will repay the loan principal and interest in one year at an annual interest rate of 14 percent.

c. Owed wages to 10 employees who worked four days at $150 each per day at the end of December? The company will pay employees at the end of the first week of January 2013.