1) The warehouse employees counted the ending inventory on hand at December 31, 2003. Their ending inventory balance is $40,000. (Remember we are using the periodic inventory method.) 2) The supplies department counted the supplies on hand. The balance of supplies at December 31 is $600. 3) The note payable is due in 5 years and was initiated on April 1, 2003. The note payable requires annual interest payments of 10% payable on March 31 of each year. (Note: I used 275 days out of 365 to prorate the interest expense on the note payable) 4) The company has estimated that bad debt expense is equal to one half of a percent (.005) of net sales (sales less sales discounts and returns) . 5) December salaries and wages will be paid on January 5, 2004. December salaries and wages are $5,000. 6) Two of the fixed assets have not been completely depreciated. These two items are a mainframe computer purchased for $20,000 in 2002 and a personal computer purchased in the current year on October 1, 2003 for $3,000. Computers are depreciated using the straight line method over 3 years. The salvage value is 0. 7) The companys income tax rate is 15%. (For taxes most companies complete the other adjusting entries and then post them to the GL. Then prepare a preliminary income statement and calculate the taxes. Then they can make the adjusting entry for taxes and post to the general ledger).

Instructions: 1) Prepare the adjusting entries for December 31, 2003. Provide any necessary calculations to support your entries. Note: Dont forget to put the income tax adjusting journal entry in the general journal and post it to the general ledger.