Carrier Enterprises started business on January, 1, Year 1 and keeps its books on the cash basis of accounting. The trial balance of the company at December 31, Year 1 is as follows:

Selling Expenses

Cash $5,000 (Debit)

Common Stock $10,000 (Credit)

Sales 40,000 (Credit)

Cost of Sales 20,000 (Debit)

Payroll Expense 8,000 (Debit)

Selling Expenses 3,000 (Debit)

Admin expenses 5,000 (Debit)

Small tools expenses 5,000 (Debit)

Income tax expense 4,000 (Debit)

Other information about Carrier's operations:

1. Customers owe the company $20,000 on unpaid invoices at the end of the year.

2. The company has goods with a cost of $12,000 in its warehouse at year end. The company owes its supplier for all of these goods, plus they owe another $2,000 on a prior shipment that was sold during the year.

3. The amount the company shows as small tools is for the principal manufacturing asset of the company. The company depreciates its fixed assets on a straight line basis with a five year asset life. Fixed assets are assumed to be purchased at the beginning of the year.

4. Included in administrative expenses is a payment on the companys one year general liability insurance policy for $2,400. The policy was purchased and effective on July 1, Year 1.

5. When reconciling the bank accounts for the year, the company discovered that it had received a $500 bad check from a customer. The check was re-deposited and paid in January of Year 2.

6. The company estimates that 1.5% of its sales will eventually be uncollectible.

7. The company pays its employees on a weekly basis 7 days after the end of the pay period. The last paycheck date for the year was on December 31st. The weekly payroll of the company is $1,300.

8. The companys tax rate is 25%. There were no non-taxable transactions made by the company.

Carrier Enterprises' bank has requested that Carrier provides it with GAAP financial statements in order to obtain a line of credit. You are required to prepare the journal entries needed to adjust their financial statements from the cash basis to the accrual basis.