Burke Bros. 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, 2024:
1. Burke Bros. has a $40,000, 5.5% note payable. Interest is payable on a monthly basis on the first of the month. Assume that Burke Bros. made the correct interest payments on December 1, 2024, and January 1, 2025.
2. Burke Bros. pays its employees a total of $7,500 every second Tuesday for work completed the two preceding weeks. Employees work a five-day week, Monday to Friday. Assume December 31, 2024, is a Friday and employees were paid on Tuesday, December 21, 2024, and will be paid again on Tuesday, January 4, 2025.
3. Burke Bros. owns drilling equipment, which it rents to customers for $1,200 per day. On December 31, 2024, a customer has had the equipment for 10 days. Burke Bros. billed the customer for 15 days when the equipment was returned on January 5, 2025. The customer paid the full amount that day.
4. Burke Bros. received the $290 December telephone bill on January 5, 2025. The bill was paid on January 9, 2025.
5. Burke Bros. has a $10,000, 7% note receivable with a customer. Interest is receivable every six months on April 30 and October 31. Assume the customer makes the correct payments to Burke Bros. on April 30, 2024, and October 31, 2024.

Instructions
For each of the above items, do the following:
a. Prepare the adjusting entry required on December 31, 2024.
b. Prepare the journal entries to record the related cash transactions in 2025. Assume all payments and receipts are made as indicated.

Taking It Further

Indicate which elements in the financial statements (assets, liabilities, owner’s equity, revenue, expenses, and profit) would be either understated or overstated at December 31, 2024, if these accounts were not adjusted.