Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

EXERCISE 3-1

Purpose:

(L.O. 6) This exercise will provide you with examples of adjusting entries for the accrual of expenses and revenues.

The following information relates to the Yuppy Clothing Sales Corporation at the end of 2014. The accounting period is the calendar year. This is the company's first year of operations.

1. Employees are paid every Monday for the five-day work week ending on the prior Friday. Salaries amount to $2,400 per week. The accounting period ends on a Monday.
2. On October 1, 2014, Yuppy borrowed $16,000 cash by signing a note payable due in one year at 8% interest. Interest is due when the principal is due.
3. A note for $2,000 was received from a customer in a sales transaction on May 1, 2014. The note matures in one year and bears 12% interest per annum. Interest is due when the principal is due.
4. A portion of Yuppy's parking lot is used by executives of a neighboring company. A person pays $6 per day for each day's use. The parking fees are due by the fifth business day following the month of use. The fees for December 2014 amount to $2,904.

Instructions

Prepare the necessary adjusting entries at December 31, 2014.