Chapter 4, Problem 4.5E

Determining Adjustments and Accounting Equation Effects

Mobo, a wireless phone carrier, completed its first year of operations on October 31. All of the year’s entries have been recorded, except for the following:

1. a. At year-end, employees earned wages of $6,000, which will be paid on the next payroll date, November 6.
2. b. At year-end, the company had earned interest revenue of $3,000. It will be collected December 1.

Required:

1. 1. What is the annual reporting period for this company?
2. 2. Identify whether each required adjustment is a deferral or an accrual.
3. 3. Show the accounting equation effects of each required adjustment, using the format shown in the demonstration case.
4. 4. Why are these adjustments needed?

E4-5 Recording Adjusting Journal Entries

Refer to E4-4.

Required:

Record the required adjusting journal entry for transactions (a) and (b).