Dodie Company completed its first year of operations on December 31. All of the year's entries have been recorded except for the following: a. At year-end, employees earned wages of $4,000, which will be paid on the next payroll date in January of next year.
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:
a. What is the annual reporting period for this company?
b. 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.
c. Why are these adjustments made?

a. What is the annual reporting period for this company?

January to December

b. 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.

Dr Wages expense 4,000

    Cr Wages payable 4,000

Accrued expense

Dr Interest receivable 1,500

    Cr Interest revenue 1,500

Accrued revenue  

c. Why are these adjustments made?

Even though the wages will be paid during January, the expense was incurred during December, therefore, the liability and the expense must be recorded. The interest will be collected in March, but it was earned during the past year.

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