During 2012, Riverside Company completed the following two transactions. The company's fiscal year ends on December 31.

a. Paid and recorded wages of \(\$ 260,000\) during 2012; however, at the end of December 2012, wages of \(\$ 10,200\) for three days are unpaid and unrecorded because the next weekly pay day is January \(6,2013\).

b. Rented office space to another party and collected \(\$ 6,000\) on December 10,2012 . The rent collected was for 30 days from December 12, 2012, through January 10, 2013, and was credited in full to rent revenue.

\section*{Required:}

1. Prepare

(a) the adjusting entry required on December 31, 2012, and

(b) the journal entry on January 6, 2013, to record the payment of any unpaid wages from December 2012.

2. Prepare

(a) the journal entry for the collection of rent on December 10, 2012, and

(b) the adjusting entry on December 31, 2012.

3. Determine the financial statement effects for each of the journal entries you prepared in (1) and (2). Indicate the accounts affected, amounts, and direction of the effects ( + for increases and - for decreases) on the accounting equation. Use the following headings:

4. Show how the liabilities related to these transactions should be reported on the company's statement of financial position at December 31, 2012.
5. Explain why the accrual method of accounting provides more relevant information to financial analysts than the cash method.

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Date Assets Liabilities. Shareholders' Equity