Challenging Journal Entries
Response to the following problem:
The accountant for Han Company is considering how to journalize the following transactions:
a. The employees of Han Company earned $105,000. The employees received $90,000 in cash and were promised that they will receive the remaining $15,000 as a pension payment on the date that they retire.
b. On August 1, 2009, Han Company paid $1,800 cash for one year of rent on a building it is using. This one year of rent is scheduled to be in effect for the 12 months starting on August 1, 2009.
1. What journal entry should be made on the books of Han Company to record the employee compensation information in (a)?
2. Describe any assumptions necessary in making the employee compensation journal entry in (1).
3. Make the necessary journal entry on Han Company's books on August 1 to record the payment for the building rent described in (b).
4. Consider the journal entry made in (3). Is any adjustment to Han's books necessary as of December 31, 2009, as a consequence of the rent journal entry made on August 1?