[Solved] The Company was formed 2 years ago and provides web design services for small businesses
The Company was formed 2 years ago and provides web design services for small businesses. The company has a December 31st year-end. The last time that adjusting entries were made was December 31, 2017. The trial balance for the year-ended December 31, 2018 was prepared. You are the accountant and you have made the following observations that require year-end adjustments. In the space provided, prepare the necessary adjusting journal entries.
1. The balance of Prepaid Insurance represents payment of the annual insurance premium that was made on April 1 of this year.
2. On September 30, the Company signed into a 10 year note payable with the local bank. The note bears interest at a rate of 6%. The accrued, interest plus $3,000, will be due on September 30, 2019.
3. The Company has rented a building that had more space than was needed, so management sublet a portion of the space to another company on December 1. At that time, they collected $6,400 in advance. This represents a prepayment of the first 4 month’s rent.
4. When the company purchases office supplies, they charge them to Supplies expense. At the end of the year $200 of supplies remained on hand.
5. The Equipment is estimated to have a 10-year life. No depreciation has been charged for the year.
6. At year-end, ESP had performed $2,800 of services, but had not as yet billed the clients.
| ESP Corporation | ||||||||||
| Worksheet for year ended December 31, 2018 | ||||||||||
| Trial Balance | Adjustments | Adjusted Trial Balance | Income Statement | Balance Sheet | ||||||
| Cash | 5,900 | |||||||||
| Accounts Receivable | 12,450 | |||||||||
| Office Supplies | ||||||||||
| Prepaid insurance | 2,400 | |||||||||
| Equipment | 169,000 | |||||||||
| Accumulated Depreciation – Equipment | 21,900 | |||||||||
| Accounts Payable | 9,950 | |||||||||
| Interest Payable | ||||||||||
| Unearned Rent Revenue | 6,400 | |||||||||
| Notes Payable | 30,000 | |||||||||
| Common Stock | 40,500 | |||||||||
| Retained Earnings | 24,000 | |||||||||
| Dividends | 4,000 | |||||||||
| Service Revenue | 194,500 | |||||||||
| Rent Revenue | 1,600 | |||||||||
| Depreciation Expense | ||||||||||
| Salaries and Wages Expense | 84,700 | |||||||||
| Rent Expense | 30,000 | |||||||||
| Utilities Expense | 13,900 | |||||||||
| Insurance Expense | ||||||||||
| Supplies Expense | 6,500 | |||||||||
| Interest Expense | ||||||||||
| 328,850 | 328,850 | |||||||||
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