Chapter 4, Problem 4.3E

Recording Adjusting Entries

Diane Company completed its first year of operations on December 31. All of the year’s entries have been recorded except for the following:

1. a. At year-end, employees earned wages of $4,000, which will be paid on the next payroll date in January of next year.
2. b. At year-end, the company had earned interest revenue of $1,500. The cash will be collected March 1 of the next year.

Required:

1. 1. What is the annual reporting period for this company?
2. 2. Identify^- whether each transaction results in adjusting a deferred or an accrued account. Using the process illustrated in the chapter, prepare the required adjusting entry for transactions (a) and (b). Include appropriate dates and write a brief explanation of each entry.
3. 3. Why are these adjustments made?