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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Accrued Liabilities

Charger Inc. had the following items that require adjusting entries at the end of the year.

a. Charger pays its employees $5,000 every Friday for a 5-day work week. This year December 31 falls on a Wednesday.

b. Charger earned income of $800,000 for the year for tax purposes. Its effective tax rate is 35%. These taxes must be paid by April 15 of next year.

c. Charger borrowed $280,000 with a note payable dated August 1. This note specifies 6%. The interest and principal are due on March 31 of the following year.

d. Charger’s president earns a bonus equal to 100% of income in excess of $650,000. Income for the year was $800,000. This bonus is paid in May of the following year and any expense is charged to wages expense.

Required:

Prepare the adjusting journal entries to record these transactions at the end of the current year.

To determine

Concept introduction:

Liabilities:

Liabilities are the obligation of the business or amount payable by the business. Liabilities can current or long term. Current liabilities are liabilities payable within the short term or business cycle of the company, for example Accounts payable for purchases and utilities payable. Long term liabilities are liabilities payable in a long period/ years, for example long term loan.

To prepare:

The journal entries for the given liabilities transactions.

Explanation

The journal entries for the given liabilities transactions are explained as follows:

Charger Inc.
Adjusting Journal Entries
As at December 31
# Account Titles Debit Credit
a. Wages Expense $ 3,000
Wages Payable $ 3,000
(Being adjustment made for the expense accrued) (5000*3/5)
b...

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