Action Quest Games records adjusting entries on an annual basis. The company has the following information available on accruals that must be recorded for the year ended December 31, 2014:
1. Action Quest has a 4% note payable with its bank for $48,000. Interest is payable on a monthly basis on the first of the month.
2. Action Quest is open seven days a week and employees are paid a total of $3,500 every Monday for a seven-day (Monday-Sunday) workweek. December 31, 2014, is a Wednesday, so employees will have worked three days (Monday-Wednesday) before the yearend that they have not been paid for as at December 31. Employees will be paid next on Monday, January 5, 2015.
3. Action Quest receives a commission from Pizza Shop next door for all pizzas sold to customers using Action Quest's facility. The amount owing for December is $520, which Pizza Shop will pay on January 7, 2015.
4. The December utility bill for $425 was unrecorded on December 31. Action Quest paid the bill on January 9, 2015.
5. Action Quest sold some equipment on October 1, 2014, in exchange for a $6,000, 6% note receivable. The principal and interest are due on February 1, 2015.
Instructions
(a) For each of the above items, prepare the adjusting entry required at December 31, 2014.
(b) For each of the above items, prepare the journal entry to record the related cash transaction in 2015. Assume all payments and receipts are made as indicated.