The following transactions occurred during December 31, 2021, for the Microchip Company. On October 1, 2021, Microchip lent $115,000 to another company. A note was signed with principal and 8% interest to be paid on September 30, 2022. On November 1, 2021, the company paid its landlord $5,400 representing rent for the months of November through January. Prepaid rent was debited. On August 1, 2021, collected $10,800 in advance rent from another company that is renting a portion of Microchip’s factory. The $10,800 represents one year’s rent and the entire amount was credited to deferred rent revenue. Depreciation on office equipment is $4,050 for the year. Vacation pay for the year that had been earned by employees but not paid to them or recorded is $7,550. The company records vacation pay as salaries expense. Microchip began the year with $1,850 in its asset account, supplies. During the year, $6,200 in supplies were purchased and debited to supplies. At year-end, supplies costing $3,100 remain on hand. Required: 1. & 2. If Microchip’s accountant employed reversing entries for accruals, prepare the adjusting entries at the end of 2021 for only those entries that would be reversed. 3. Prepare the appropriate reversing entries at the beginning of 2022.

Reversing entries are given below

Explanation:

The accountant would reverse the adjusting entries of the accrual of salaries payable and the accruals of interest receivable.

December 31, 2021 (To record interest receivable)

                                                                        DEBIT               CREDIT

Interest receivable [$115,000*8%*3/12]         2300

Interest revenue                                                                          2300

December 31, 2021 (To record salaries payable)

                                         DEBIT            CREDIT

Salaries expense            7550

Salaries payable                                       7550

January 1, 2022  (To reverse the entry recorded on December 31, 2021)

                                             DEBIT           CREDIT

Interest revenue                   2300

Interest receivable                                      2300

January 1, 2022  (To reverse the entry recorded on December 31, 2021)

                                              DEBIT              CREDIT

Salaries payable                     7550

Salaries expense                                               7550

both are integral parts of a corporate balance sheet. the cash flow statement, or statement of cash flows, measures the sources of a company's cash and its uses of cash over a specific time period. the income statement measures a company's financial performance, such as revenues, expenses, profits or losses over a specific time period (in fact, it's sometimes called a statement of financial performance).

a cash flow statement shows exactly how much money a company has received and how much it has spent, traditionally over a period of one month. it captures the current operating results and changes on the balance sheet, such as increases or decreases in accounts receivable or accounts payable, and does not include noncash accounting items such as depreciation and amortization. the cash flow generally comes from revenue received as a result of business activity, but it may be augmented by funds available as a result of credit. a cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.