A review of the ledger of Greenberg Company at December 31, 2002, produces the following data pertaining to the preparation of annual adjusting entries.
1. Salaries Payable $0. There are eight salaried employees. Salaries are paid every Friday for the current week. Five employees receive a salary of $750 each per week, and three employees earn $500 each per week. December 31 is a Tuesday. Employees do not work weekends. All employees worked the last 2 days of December.
2. Unearned Rent $324,000. The company began subleasing office space in its new building on November 1. At December 31, the company had the following rental contracts that are paid full for the entire term of the lease.
Term Number of
Date (in months) Monthly Rent Leases
Nov. 1 6 $4,000 5
Dec. 1 6 $8,500 4
3. Prepaid Advertising $13,200. This balance consists of payments on two advertising contracts. The contracts provide for monthly advertising in two trade magazines. The terms of the contracts are as follows:
Number of Magazine
Contract Date Amount Issues
A650 May 1 $6,000 12
B974 Oct. 1 7,200 24
The first advertisement runs in the month in which the contract is signed.
4. Notes Payable $100,000 This balance consists of a note for one year at an annual interest rate of 12%. Dated June 1.
Instructions: Prepare the adjusting entries at December 31, 2002. (Show all computations)
The solution prepares annual adjusting entries.