154 CHAPTER 4 The Mechanics of Financial Accounting P4-8 Preparing adjusting journal entries The following information is available for M&M Johnson Inc.: a. The December 31, 2014 supplies inventory balance is $85,000. A count of supplies reveals that the company actually has $30,000 of supplies on hand. b. As of December 31, 2014, Johnson Inc. had not paid the rent for December. The monthly rent is $2,400. c. On December 20, 2014, Johnson collected $18,000 ke atomer advances for the subsequent perfor- mance of a service. Johnson recorded the $18.000 aed revenue, and as of December 31 two- thirds of the service had been performed. d. The total cost of Johnson's fixed assets is $500,000. Joan on estimates that the assets have a useful life of ten years and uses the straight-line method of depreciation. e. Johnson borrowed $10,000 at an annual rate of 12 percent on July 1, 2014. The first interest payment will be made on January 1, 2015. f. Johnson placed several ads in local newspapers during December. On December 31, the company receised a $28,000 bill for the ads, which was not recorded at that time. On July 1, 2014, Johnson paid the premium for a one-year life insurance policy. The $350 cost of the premium was capitalized when paid. REQUIRED: Prepare the adjusting journal entries necessary on December 31, 2014. The following information is available for Derrick Company: P4-9 Account Inferring adjusting journal entries from changes in T-account T-Account Balance before Adjustments 14,500 T-Account Balance after Adjustments 11,800 Prepaid Rent