Jester Company began operations on January 1, 2018. The company had the following transactions in its first year of business: . . . . January 4: Owners invested $120,000 (the par value of the stock) in exchange for 20,000 shares of common stock. February 2: Jester took out a 10-year note payable in the amount of $80,000 to pay for operating expenses. Interest payments are due every six months, and the balance of the note will be paid off in a lump- sum in 10 years. The interest rate is 10% annually, that is, 5% every six months. February 16: Jester signed a rental lease for its operating facility and paid a year of rent up front in the amount of $60,000. The rental lease runs from March 1, 2018, through February 29, 2019. March 1: Jester purchased office supplies in the amount of $12,000 and paid in cash. March 12: Jester paid $18,000 cash for advertising expenses. April 1: Jester purchased a two-year insurance policy that runs from April 1, 2018, to March 31, 2020, in the amount of $40,000 and paid in full for the policy in cash. May 12: Jester negotiated a contract with a customer to provide entertainment services for a one-year period running from June 1, 2018, to May 31, 2019. The customer paid the contract in full on May 12 with cash in the amount of $64,000.- June 16: Jester paid wages in the amount of $12,000 to employees in cash. July 20: Jester negotiated a contract with a customer to provide entertainment services for a six-month period running from September 1, 2018, to February 28, 2019. The customer paid the contract in full on July 20 with cash in the amount of $42,000.- August 2: Jester paid cash in the amount of $4,000 for the first interest payment on the note payable taken out on February 2. August 18: Jester received and paid a utilities bill in the amount of $7,000 in cash. September 10: Jester paid wages in the amount of $28,000 in cash. October 1: Jester negotiated a contract with a customer to provide entertainment services for a one- year period running from October 1, 2018, to September 30, 2019, in the amount of S420,000. The customer paid the contract in full on October 1. November 14: Jester purchased office supplies in the amount of $26,000 on account with the vendor. December 6: Jester received an advertising bill for $22,000. The services were provided in 2018 and the bill will be paid in January At year-end, Jester had $18,000 of office supplies remaining on hand. . . . Required: a. Prepare the journal entrics for the original transactions. Provide brief explanations if necessary. (15 points) b. Prepare any necessary year-end adjusting journal entries for these transactions. Provide brief explanations if necessary. (7 points)
