Adjusting Entries: Prepare the correct adjusting entries using the following information.

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)

One Time Hits Unadjusted Trial Balance December 31, 2003 Credits Debits 30,750.00 13,850.00 2,000.00 50,000.00 1,300.00 40,000.00 20,000.00 5.925.00 Account # Description 10100 Cash 10200 Accounts Receivable 10300 Allowance For Doubtful Accounts 10400 Inventory 10500 Supplies 15100 Fixed Assets 15200 Accumulated Depreciation 20100 Accounts Payable 20200 Salaries and Wages Payable 20300 Interest Payable 20400 Income Tax es Payable 25100 Notes Payable 30000 Common Stock 30002 Retained Earnings 30100 Sales 30300 Sales Discounts 40000 Purchases 50100 Salaries and Wages 50200 Office Supplies 50300 Promotion and Advertising 50400 Other Adminstrative Expenses 50500 Depreciation Expenses 50600 Interest Expenses 50601 Cost of Goods Sold 50602 Bad Debt Expense 50700 Income Tax es Expense 14,000.00 3,000.00 2,000.00 617,800.00 7,000.00 405,625.00 100,000.00 10,000.00 5,200.00 1,000.00 Totals 664.725.00 664,725.00