PREPARATION OF ADJUSTMENTS. Libby Kueppers operates a large day-care center in South Orange, New Jersey. The day-care center serves several nearby busi-nesses, as well as a number of individual families. The businesses pay $2,200 per child per year for day-care services for their employees’ children. The businesses pay in advance on a yearly basis. For individual families, day-care services are provided monthly and billed at the beginning of the next month. At December 31, 19x8, the following transactions are partially complete:

a) Day-care services in the amount of $12,450 were provided to individual families, who will be billed in January 19x9.

b) At January 1, 19x8, the balance in unearned revenue was $105,100. During 19x8 the center collected $238,400 from businesses (crediting unearned revenue) for daycare services. At December 31, 19x8, $113,400 of service revenue is unearned.

c) The day-care center had prepaid insurance at January 1, 19x8, of $4,200. During the year, $15,600 was paid for insurance. An examination of insurance policies indicates that prepaid insurance at December 31, 19x8, is $5,200.

.d) The day-care center owns a bus that it uses for field trips. The bus cost $24,800 and has an expected residual value of $3,400 and an expected life of 8 years.

e) The day-care center has a 5-year, $60,000, 9% note payable outstanding. Five months’ interest on the note is unpaid and unrecorded at December 31.

f) Salaries of $8,320 are owed but unpaid and unrecorded at December 31.

g) The inventory of disposable diapers on January 1, 19x8, is $1,400. During the year, disposable diapers were purchased at a cost of $16,700. The $16,700 cost was debited to supplies inventory. At the end of 19x8, the cost of diapers in inventory is $890.

REQUIRED:

Prepare adjusting entries for the day-care service at December 31, 19x8.