Greenock Limited has the following information available for accruals for the year ended December 31, 2015. The
Question:
Greenock Limited has the following information available for accruals for the year ended December 31, 2015. The company adjusts its accounts annually.
1. The December electric bill for $425 was unrecorded on December 31. Greenock paid the bill on January 11.
2. Greenock is open seven days a week and employees are paid a total of $3,500 every Monday for a seven-day (Monday–Sunday) workweek. December 31 is a Thursday, so employees will have worked four days (Monday, December 28—Th ursday, December 31) that they have not been paid for by year end. Employees will be paid next on January 4.
3. Greenock signed a $45,000, 5% bank loan on November 1, 2014, due in two years. Interest is payable on the fi rst day of each following month.
4. Greenock receives a fee from Pizza Shop next door for all pizzas sold to customers using Greenock’s facility. Th e amount owing for December is $300, which Pizza Shop will pay on January 4.
5. Greenock rented some of its unused warehouse space to a client for $6,000 a month, payable the first day of the following month. It received the rent for the month of December on January 2.
Instructions
(a) For each situation, prepare the adjusting entry required at December 31. Round all calculations to the nearest dollar.
(b) For each situation, prepare the journal entry to record the subsequent cash transaction in 2016.
Step by Step Answer:
Financial Accounting Tools for Business Decision Making
ISBN: 978-1118644942
6th Canadian edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine