Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 47

Recording and Reporting Current Liabilities
During 2013, Riverside Company completed the following two transactions. The annual accounting period ends December 31.
a. On December 31, 2013, calculated the payroll, which indicates gross earnings for wages ($130,000), payroll deductions for income tax ($13,000), payroll deductions for FICA ($10,000), payroll deductions for United Way ($2,000), employer contributions for FICA (matching), state unemployment taxes ($1,100), and federal unemployment taxes ($200). Employees were paid in cash, but these payments and the corresponding payroll deductions and employer taxes have not yet been recorded.
b. Collected rent revenue of $3,600 on December 10, 2013, for office space that Riverside rented to another business. The rent collected was for 30 days from December 11, 2013, to January 10, 2014, and was credited in full to Unearned Rent Revenue.
Required:
1. Give the journal entries to record payroll on December 31, 2013.
2. Give ( a ) the journal entry for the collection of rent on December 10, 2013, and ( b ) the adjusting journal entry on December 31, 2013.
TIP: Notice that the revenue recorded on December 10 includes revenue for 10 days (out of 30) that isn't earned until after December 31.
3. Show how any liabilities related to these items should be reported on the company's balance sheet at December 31, 2013.
4. Explain why the accrual basis of accounting provides more relevant information to financial analysts than the cash basis.