During August, the following transactions were completed:

1. Purchased equipment, paying $6,000 cash and signing a 3-year note payable for $30,000. The equipment has a 5-year useful life. The note has a 5% interest rate which is payable on the first day of each following month.
2. Owner invested $50,000 cash in the company.
3. Paid $3,600 cash for a 12-month insurance policy effective August 1.
4. Paid six months rent for office space for $3,000 per month.
5. Paid $5,300 for supplies.
6. Collected $2,500 cash on account from a customer that was billed in the previous month (July).
7. Performed services for a customer who had paid $1,510 in advance last month (July).
8. Paid $300 cash for an advertising bill.
9. Paid salaries of weeks in August for $10,000.
10. Performed services worth $20,000 on account and billed customers.
11. Received a bill for $2,500 for utilities used during August. The amount is not due until next month.

Instructions:

1) Journalize above transactions. (11 points)

2) Journalize the following adjustments (5 points)

• Insurance expired during the common month.
• Adjustment of prepaid rent.
• Supplies used, $1,250.
• Equipment depreciation, $750 per month.
• Accrual of interest on note payable.
• Bad debts expense is considered to be 1% of outstanding balance of accounts receivable. The company uses the allowance method. The company started the year with an accounts receivable balance of $1,250 and allowance for doubtful accounts balance of $50.

3) Journalize closing entries. (4 points)