On Nov. 30, the end of the current fiscal year, the following information is ava
ID: 2359683 • Letter: O
Question
On Nov. 30, the end of the current fiscal year, the following information is available to assist Caruso Company's accountant in making adjusting entries:a. On September 1, the company completed negotiations with a client and accepted an advance of $18,600 for services to be performed monthly in the next year. The $18,600 was credited to Unearned Services Revenue.
b. On Saturday, December 2, the company, which is on a six-day workweek, will pay its regular employees their weekly wages of $15,000
Explanation / Answer
On Nov. 30, the end of the current fiscal year, the following information is available to assist Caruso Company's accountant in making adjusting entries:
a. On September 1, the company completed negotiations with a client and accepted an advance of $18,600 for services to be performed monthly in the next year. The $18,600 was credited to Unearned Services Revenue.
18,600/12 = 1550
September through November = 3 months
1550 per month times 3 months = 4650
Debit: Unearned Revenue 4650
Credit: Revenue 4650
(This journal entry will decrease the liability of unearned revenue and at the same time increase the revenue earned)
b. On Saturday, December 2, the company, which is on a six-day workweek, will pay its regular employees their weekly wages of $15,000
15,000/6 = 2500 per day
Since December 2 is a Saturday, November 30 must be a Thursday.
Accruing for Monday through Thursday is four days:
4*2500 = 10,000
Debit: Salary Expense 10,000
Credit Salary Payable 10,000
(This journal entry will recognize salary expense for 4 days and the liability of 4 days’ salary which will have to be paid)
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