Information Regarding the Rainey Company Follows

question 31

Essay

Information regarding the Rainey Company follows:
· On November 1, 2014, Rainey accepted a $10,000, three-month note receivable from a major customer. Interest on the note, computed at a 12% annual rate, will be collected with the principal.
· On December 1, 2014, Rainey borrowed $12,000 from its bank. The principal, plus interest computed at a 10% annual rate, is due on June 1, 2015.
· Rainey uses the straight-line method to record depreciation on its equipment. The equipment, which cost $12,000, has an estimated life of 10 years and no expected residual value.
· $3,725 of salaries had accrued as of December 31, 2014.
Required:
a. Assuming that Rainey does use reversing entries, prepare December 31, 2014 adjusting entries and 2015 reversing entries.
b. Assuming that Rainey does not use reversing entries, prepare journal entries to record the collection of the note receivable and the payment of the note payable in 2015.

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