A review of the ledger of Baylor Company at December 31, 2017, produces the following data pertaining to the preparation of annual adjusting entries. Salaries and Wages Payable $0. There are eight employees. Salaries and wages are paid every Friday for the current week. Five employees receive $700 each per week, and three employees earn $600 each per week. December 31 is a Tuesday. Employees do not work weekends. All employee worked the last 2 days of December. Unearned Rent Revenue $429,000. The company began subleasing office space in its new building on November 1. Each tenant is required to make a $5,000 security deposit that is not refundable until occupancy is terminated. At December 31, the company had the following rental contracts that are paid in full for the entire term of the lease. Prepaid Advertising $13, 200. This balance consists of payments on two advertising contracts. The contracts provide for monthly advertising in two trade magazines. The terms of the contracts are as shown below. The first advertisement runs m the month in which the contract is signed. Notes Payable $60,000. This balance consists of a note for one year at an annual interest rate of 12%, dated June 1. Prepare the adjusting entries at I December 31, 2017. (Show all computations).

The adjusting entries are prepared by Baylor Company on December 31, 2017. The objective of preparing adjusting entries is to convert cash transactions into the accrual accounting method.

What are adjusting entries?

In accounting/accountancy, the adjusting entries include a journal that is usually made at the end of the accounting period to allocate income and expenditure over the actual period.

As per the given information, the calculation for a few specific items are given below:

[tex]1. \rm \, Salaries \,and \,Wages = \dfrac{2}{5} \times [(3,500 + 1,800)]\\ \\\rm \, Salaries \,and \,Wages = \$ 2,120\\\\2.Rent\,Deposit = [\$5,000 + (4 + 5)] \\\\Rent\,Deposit = $45,000\\\\Rent\,Revenue\, = \rm\, (\$6,000\times 5 \,\rm\,leases \times\,2 \rm\,months + 8,500\times 4 \,leases \times 1 \,month)\\\\Rent\,Revenue\, = \$94,000\\[/tex]

[tex]\rm\,3.Advertising Expense = [\dfrac{6,000}{12}\times 8]+ [\dfrac{7,200}{24}\times 8]\\\\Advertising Expense = \$4,900\\\\\4. Interest Expense = 60,000 \times 12\%\times \dfrac{7}{12}\\\\ Interest Expense = \$4,200[/tex]

The adjusting entries are shown in the image attached.

Hence, the adjusting entries for the month of December 31, 2017 are prepared and shown in the image attached below.

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