Lands' End, Inc.-like all other businesses-makes adjusting entries prior to year end in order to measure assets, liabilities, revenues, and expenses properly. Examine Lands' End's balance sheet, and pay particular attention to Prepaid Expenses, Accrued Liabilities (which includes Salary Payable and Interest Payable), and Advance Payment on Orders (another title for Unearned Revenue). Assume the following balances at January 29, 1993, the beginning of the current year: Salary Payable, \(\$ 2,689\) thousand; Interest Payable, \(\$ 81\) thousand.

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1. Open T-accounts for these four accounts. Insert Lands' End's balances (in thousands) at January 29, 1993. (Examples: Prepaid Expenses, \$5,496; Interest Payable, \$81.)

2. Journalize the following for the current year, ended January 28, 1994. Key entries by letter. Explanations are not required.

Cash transactions (amounts in thousands):

a. Paid prepaid expenses, \(\$ 8,719\).

b. Paid the January 29,1993 , salary payable.

c. Paid the January 29,1993 , interest payable.

d. Received \$767 cash for customers' advance payments on orders.

Adjustments at January 28, 1994 (amounts in thousands):

e. Prepaid expenses expired: \(\$ 2,428\). (Debit General and Administrative Expense.)

f. Salary Payable, \(\$ 3,452\). (Debit Selling Expense.)

g. Accrued interest payable, \(\$ 88\).
h. Earned sales revenue for which cash has been received from customers in advance, \(\$ 1,224\).
3. After these entries are posted, show that the balances in Prepaid Expenses and Advance Payment on Orders agree with the corresponding amounts reported in the January 28, 1994, balance sheet.
Adjusting the accounts of an actual company (Obj. 2)