Question: Recording Adjusting Journal Entries Refer to E4-3.
Required: Record the required adjusting journal entries for transactions a and b.
E4-3: Determining Adjustments and Accounting Equation Effects Mo Bo, a wireless phone carrier owned by sole proprietor Morris Bonner, completed its first year of operations on December 31, 2011. All of the 2011 entries have been recorded except for the following:
a. At year-end, employees earned wages of $6,000 that will be paid on the next payroll date, January 6, 2012.
b. At year-end, the company had earned interest revenue of $3,000. It will be collected March 1, 2012.
Required: 1. What is the annual reporting period for this company?
2. Identify whether each required adjustment is an unearned revenue, accrued revenue, prepaid expense, or accrued expense.
3. Show the accounting equation effects (amounts and direction of effects) of each required adjustment. Use + for increase, - for decrease, or NE for no effect. Complete the following schedule.
4. Why are these adjustments needed?