Question

Knockoff Corporation sells a videogame unit known as the Gii. During the month of December, the following events occur. Prepare any necessary journal entries and adjusting entries that Knockoff should record.

a. Knockoff purchased $300,000 of inventory on account.

b. The company incurs salary expense of $45,000, although employees will not be paid until the

beginning of January. The company also owes an additional $7,000 to the government for payroll

taxes.

c. Knockoff determines that it owes the IRS $120,000 in income taxes for this year.

d. A retail customer places an advance order for Giis and pays Knockoff $23,000. The Giis will be

shipped in January.

e. Knockoff owes a local bank $4,000 in interest on a loan.

f. Knockoff rents a warehouse of $3,000 per week. No payments were made for the last three weeks

of the year.

Answer 1

Date	Account	Debit	credit
a	Merchandise inventory	300,000
	Accounts payable		300,000
	[Being inventory purchased on account]
b	salary expense	45000
	salary payable		45000
	[Being salary accrued but not paid]
c	Income tax expense	120000
	Income tax payable		120000
	[Being tax accrued but not paid]
d	cash	23000
	unearned sales revenue		23000
	[Being cash received for sales to be made in january]
e	Interest expense	4000
	Interest payable		4000
	[Being interest accrued but not paid]
f	Rent expense	9000
	rent payable		9000
	[being rent accrued but not paid 3000*3]