Question

Excalibur Corporation sells video games for personal computers. The unadjusted trial balance as of December 31, 2018, appears below. December 31 is the company’s fiscal year-end. The company uses the perpetual inventory system.

Account Title	Debits				Credits
Cash		23,000
Accounts receivable		32,200
Supplies		0
Prepaid rent		0
Inventory		62,000
Office equipment		83,700
Accumulated depreciation—office equipment						9,700
Accounts payable						25,800
Salaries and wages payable						2,700
Note payable						27,000
Common stock						77,000
Retained earnings						26,850
Sales revenue						177,000
Cost of goods sold		92,000
Interest expense		0
Salaries and wages expense		32,050
Rent expense		13,700
Supplies expense		1,700
Utility expense		5,700
Totals		346,050				346,050

Information necessary to prepare the year-end adjusting entries appears below.

1.The office equipment was purchased in 2016 and is being depreciated using the straight-line method over an nine-year useful life with no salvage value.

2.Accrued salaries and wages at year-end should be $4,050. (4,050 shows up as incorrect in answer)

3.The company borrowed $27,000 on September 1, 2018. The principal is due to be repaid in 12 years. Interest is payable twice a year on each August 31 and February 28 at an annual rate of 12%.

4.The company debits supplies expense when supplies are purchased. Supplies on hand at year-end cost $470.

5.Prepaid rent at year-end should be $1,300.

Prepare the necessary December 31, 2018, adjusting entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)

Answer 1

	Date	Account titles and explanations	Debit	Credit
	2018
1	Dec 31.	Depreciation expense    (83700/9)	9300
		Accumulated depreciation—office equipment		9300
		(Office equipment depreciated using straight
		line method of depreciation)
2	Dec 31.	Salaries and wages expense	1350
		Salaries and wages payable		1350
		(Salaries and wages due) (Note:1)
3	Dec 31.	Interest expense (27000*12%)	3240
		Interest payable (Note:2)		3240
		(Interest on borrowings payable for 12 months)
4	Dec 31.	Supplies	470
		Supplies expense		470
		(Supplies at the year end recorded)
5	Dec 31.	Prepaid rent	1300
		Rent expense		1300
		(Prepaid rent accounted)
	Notes:
	1. Computation of accrued salaries and wages for 2016:
	Salaries and wages payable=$2700
	Desired balance=$4050
	Increase requied=4050-2700=1350
	2. It is assumed that no interest payment has been made in the year