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the necessary adjusting entries tr Drake at the end or 2 10, nal entry explanations rs.2 Adjusting Entries Clapton Guitar Company entered into the following transactions during 2016. IThe transic tions were properly recorded in permanent (balance shect) accounts unless otherwise indicated. Date lan. 25 Purchased $480 of office supplies Feb. Rented a warehouse from Hendrix Company, paying 1 year's rent of $3,600 in advance. Recorded the 53,600 Mar. 1 Borrowed $ 10,000 from the bank, signing a 1-year note at an annualinterest rate of 1 2%. The bank insisted on moral pumal, amal payment as rent expense. atements Ac the ent of collecting the interest in advance, so it withheld the interest amount from the funds disbursed to Clapton. The company recorded the transaction as a debit to Cash, $8,800, a debit to Interest Expense, $1,200, and a credit to Notes Payable, $10,000 Purchased office equipment for $15,000, paying $3,000 down and signing a 2year, 12% annual rate note payable for the balance. The office equipment is expected to have a useful life of 10 years and a residual value of $1,500. Stroight-line depreciation is appropriate. May May 31 1 Purchased a 3-year comprehensive insurance policy for $720 Aug. Oct. Nov. 13 Issued checks to sales personnel totaling $900. The checks are advances for expected travel costs during the On December 31, 2016, the following additional information is available Sold lor d for $9 000. The purchaser made a $2,000 down payment and sgne balance. The interest and principal will be collected on the moturity date. Rented a portion of the retail floor space to Harrison Inc, for $120 per month, collecting 8 months' rent in advance. Recorded the $960 receipt as rent revenue o lyear, 10% efort 1 cludes cash 12,700 was pad N00 was withdr remainder of the year wed supplicrs s depreciating 1. Property taxes for 2016 are due to be paid by April 2017. The company has not paid or recorded its S2 300 property taxes for 2016. 2. The S302 December utility bill has not been recorded or paid. 3. Salaries accrued but not paid total $927 4. Travel cost reports indicate that $787 of the $900 advanced has been used to pay for travel expenses by com- ns ) calculation pany personnel. 5. The Office Supplies account had a balance of S129 on January 1, 2016. A physical count on December 31, 2016, showed $174 of office supplies on hand. 6. On January 1, 2016, the Buildings account and the Store Equipment account had balances of $100,000 and S65,000, respectively. The buildings are expected to have a 20-ycar useful life and an $8,000 residual value, store equipment is expected to have a 10-year life and a $2,000 residual value. They are being depre- 2017, The pretax income of On the basis of the preceding information, prepare journal entries to adjust Clapton's books as of December 31, ciated using the straight-line method. The income tax rate is 30% on current income and is payable in the first quarter of the company before adjustments is $27,749 7. upment w ne meth Required: 2016. Each entry explanation should include supporting con computations. (Round to the nearest dollar.)