Question

ACC2000

ESP Company

Computer Assignment

Adjusting Entries

Background:

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

Answer 1