1. Employees of Donovan Ltd are paid every Friday for the five-day working week from Monday to Friday. The weekly wages expense is $115 000. The accounting year-end is 31 December. Assume this falls on a Thursday.

a. Prepare the adjusting entry for the year-end.
b. If no adjusting entry is made on 31 December, what will be the impact on net profit? What will the errors in the balance sheet be?
c. What is the journal entry made on 1 January when the staff are paid?
2. On 1 July 201 6, Donovan obtained a bank loan of $100 000 at 12 per cent interest, payable yearly in arrears. The accounting year-end is 31 December.
a. What is the adjusting entry required on 31 December 2016?
b. The company's accountant forgets to prepare the above entry. What will the effect of this omission be on Donovan's financial statements?
c. Prepare the journal entry for 1 July 2017, when the first interest payment is made.