(Adjusting Entries) A review of the ledger of Oklahoma Company at December 31, 2005, producesthe 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 $700 each per week, and three employees earn $500
each per week. December 31 is a Tuesday. Employees do not work weekends. All employees workedthe last 2 days of December.
2. Unearned Rent Revenue $369,000. The company began subleasing office space in its new building
on November 1. Each tenant is required to make a $5,000 security deposit that is not refundable until occupancy is terminated. At December 31, the company had the following rental contracts
that are paid in 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 $80,000. This balance consists of a note for one year at an annual interest rate of 12%, dated June 1. Prepare the adjusting entries at December 31, 2005. (Show all computations).