Problem 2-8 (Algo) Adjusting entries [LO2-6]

Excalibur Corporation sells video games for personal computers. The unadjusted trial balance as of December 31, 2021, appears below. December 31 is the companys reporting year-end. The company uses the perpetual inventory system.

Account Title	Debits				Credits
Cash		22,700
Accounts receivable		31,900
Supplies		0
Prepaid rent		0
Inventory		59,000
Office equipment		66,150
Accumulated depreciation						9,400
Accounts payable						25,500
Salaries payable						2,400
Notes payable						24,000
Common stock						74,000
Retained earnings						20,600
Dividends		9,200
Sales revenue						174,000
Cost of goods sold		89,000
Interest expense		0
Salaries expense		31,750
Rent expense		13,400
Supplies expense		1,400
Utilities expense		5,400
Totals		329,900				329,900

Information necessary to prepare the year-end adjusting entries appears below.

1. The office equipment was purchased in 2019 and is being depreciated using the straight-line method over an nine-year useful life with no salvage value.
2. Accrued salaries at year-end should be $3,600.
3. The company borrowed $24,000 on September 1, 2021. The principal is due to be repaid in 12 years. Interest is payable twice a year on each August 31 and February 28 at an annual rate of 12%.
4. The company debits supplies expense when supplies are purchased. Supplies on hand at year-end cost $440.
5. Prepaid rent at year-end should be $1,600.

Required:

Prepare the necessary December 31, 2021, adjusting entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)

• The office equipment was purchased in 2019 and is being depreciated using the straight-line method over an nine-year useful life with no salvage value.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
1

• Accrued salaries at year-end should be $3,600.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
2

• The company borrowed $24,000 on September 1, 2021. The principal is due to be repaid in 12 years. Interest is payable twice a year on each August 31 and February 28 at an annual rate of 12%.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
3

• The company debits supplies expense when supplies are purchased. Supplies on hand at year-end cost $440.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
4

• Prepaid rent at year-end should be $1,600.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
5