The Following Are Selected Unadjusted Account Balances as at December

question 54

Essay

The following are selected unadjusted account balances as at December 31, 2014, the year end of Joseph's Law Firm: Additional information obtained from a review of the law firm's records:
1. Work done for clients in December that will be invoiced in January is $9,800.
2. Prepaid insurance includes $12,600 paid for a one-year policy that was effective December 1, 2014.
3. Salaries are paid monthly on the 15^th of each month. The salaries earned by employees from December 16 to 31^st total $5,000.
Instructions
a. Prepare the December 31, 2014 adjusting entries required for these items.
b. Prepare the reversing entries required for January 1, 2015.

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Definitions:

Capital Asset Pricing Model

A framework detailing how expected returns on assets, especially stocks, correlate with systematic risk.

Accounting Beta

A measure of the sensitivity of a firm's earnings before interest and taxes to changes in the market as a whole.

Pure Play Method

A valuation method focusing on companies specializing in a single line of business to estimate investment risks and returns.

Scenario Analysis

A method used in finance to analyze the different possible outcomes of a decision given varying sets of assumptions.