Preparation of adjusting entries necessary at the end of the year.
Sutton Coat Company, which prepares annual financial statements, is preparing adjusting entries on December 31. Analysis indicates the following:
1. The company is the defendant in an employee discrimination lawsuit involving $50,000 of damages. Legal counsel believes it is unlikely that the company will have to pay any damages.
2. December 31st is a Friday. The employees of the company have been paid on Monday, December 27th for the previous week which ended on Friday, December 24th. The company employs 30 people who earn $100 per day and 15 people who earn $150 per day. All employees work 5-day weeks.
3. The company is a defendant in a $500,000 product liability lawsuit. Legal counsel believes the company probably will have to pay the amount requested.
4. Employees are entitled to one day's vacation for each month worked. All employees described above in (2.) worked the month of December.
Instructions
Prepare any adjusting entries necessary at the end of the year.