Recording Adjusting Entries
Ramos Company completed its first year of operations on December 31, 2011. All of the 2011 entries have been recorded except for the following:
a. At year-end, employees earned wages of $7,000, which will be paid on the next payroll date, January 6, 2012.
b. At year-end, the company had earned interest revenue of $2,000. The cash will be collected March 1, 2012.
Required:
1. What is the annual reporting period for this company?
2. Identify whether each transaction results in adjusting a deferred or an accrued account. Using the process illustrated in the chapter, give the required adjusting entry for transactions (a) and (b).
Include appropriate dates and write a brief explanation of each entry.
3. Why are these adjustments made?