X Company completed it\'s first year of operations on Dec 31, 2011. All of the 2

Question

X Company completed it's first year of operations on Dec 31, 2011. All of the 2011 entires have been recorded except for the following:

a. @ year end, employees earned wages of $7000, which will be paid on the next payroll date, January 6, 2012.
b. @ year end, company had earned interest revenue of $2,000. The cash will be collected March 1, 2012.

Questions:
1. What is the annual reporting period for this company?
2. Identify whether each transaction results in adjusting a deffered or and accrued account. Give the required adjusting entry for transactions a and b. Include dates and write a breif description of each entry.
3. Why are these adjustments made?

Explanation / Answer

1. Jan 1, 2011 to Dec 31,2011 2. a) Date Details Debit Credit Dec 31,2011 Wages Expense $7,000     Wages payable 7,000 (To record accrued wages) 6-Jan-12 Wages   7,000    Cash 7,000 (To record wages pament) Date Details Debit Credit Dec 31,2011 Wages Expense $7,000     Wages payable 7,000 (To record accrued wages) 6-Jan-12 Wages   7,000    Cash 7,000 (To record wages pament)
b) Dec 31,2011 Unearned Service Revenue $2,000                                       Service Revenue                       2,000                     (To record interest revenue earned)
3. Without this adjusting entry, liabilities and interest expense are understated, and net income and stockolders' equity are overstated.Hence, the adjusting entries are needed Date Details Debit Credit Dec 31,2011 Wages Expense $7,000     Wages payable 7,000 (To record accrued wages) 6-Jan-12 Wages   7,000    Cash 7,000 (To record wages pament)

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