Fanatical Fashions, a department store, has the following unadjusted account balances as of December 31, 2015, the Company’s year- end:
• Cash: $ 3,230,000 • Accounts Receivable: $ 1,240,000 • Prepaid Insurance: $ 252,000
• Prepaid Rent: $ 480,000 • Buildings: $ 3,540,300
• Accumulated Depreciation– Buildings: $ 360,000
• Accounts Payable: $ 980,000
• Wages Payable: $ 420,000
• Note Payable: $ 360,000
• Common Stock: $ 1,000,000
• Sales Revenue: $ 7,450,300
• Wage Expense: $ 1,120,000
• Utilities Expense: $ 94,000
• Insurance Expense: $ 120,000
• Interest Expense: $ 234,000
• Rent Expense: $ 260,000
• Depreciation Expense— Buildings: $ 0 At year- end, Fanatical Fashions makes necessary adjusting journal entries to properly record revenues and expenses for the year. The following information applies to the adjusting journal entries:
• The prepaid insurance balance relates to a two year insurance policy purchased in June that covers the period of 7 / 1/ 15– 6/ 30/ 17. 7 / 1 / 15 – 6 / 30 / 17.
• The prepaid rent balance relates to rent that was paid in January 2015 to cover the company’s facilities for the year 2015.
• Wages for 2015 in the amount of $ 236,000 will be paid after year- end and have not yet been recorded.
• Fanatical purchased the buildings in the beginning of 2015 and depreciates on a yearly basis. It must record a full year of depreciation at the end of 2015. The buildings have no residual value, a 30- year estimated useful life, and will be depreciated on a straight- line basis.
• Fanatical has not yet recorded interest expense for 2015 on the note payable in the amount of $ 16,000. Prepare the journal entries necessary to record the adjustments at year- end.