Terrific Temps fills temporary employment positions for local businesses. Some businesses pay in advance for services; others are billed after services have been performed. Advance payments are credited to an account entitled Unearned Fees. Adjusting entries are performed on a monthly basis. An unadjusted trial balance dated December 31, year 1, follows. (Bear in mind that adjusting entries have already been made for the first 11 months of year 1, but not for December.)

TERRIFIC TEMPS

UNADJUSTED TRIAL BALANCE

DECEMBER 31, YEAR 1Cash$27,020Accounts receivable59,200Unexpired insurance900Prepaid rent3,000Office supplies600Equipment60,000Accumulated depreciation: equipment$29,500Accounts payable4,180Notes payable12,000Interest payable320Unearned fees6,000Income taxes payable4,000Unearned revenue20,000Retained earnings49,000Capital stock25,000Dividends3,000Fees earned75,000Travel expense5,000Insurance expense2,980Rent expense9,900Office supplies expense780Utilities expense4,800Depreciation expense: equipment5,500Salaries expense30,000Interest expense320Income taxes expense12,000$225,000$225,000

Other Data

1. Accrued but unrecorded fees earned as of December 31, year 1, amount to $1,500.
2. Records show that $2,500 of cash receipts originally recorded as unearned fees had been earned as of December 31.
3. The company purchased a six-month insurance policy on September 1, year 1, for $1,800.
4. On December 1, year 1, the company paid its rent through February 28, year 2.
5. Office supplies on hand at December 31 amount to $400.
6. All equipment was purchased when the business first formed. The estimated life of the equipment at thattime was 10 years (or 120 months).
7. On August 1, year 1, the company borrowed $12,000 by signing a 6-month, 8 percent note payable. The entire note, plus 6 months' accrued interest, is due on February 1, year 2.
8. Accrued but unrecorded salaries at December 31 amount to $2,700.
9. Estimated income taxes expense for the entire year totals $15,000. Taxes are due in the first quarter of year 2.

Required:

a.For each of the numbered paragraphs, prepare the necessary adjusting entry.

b.Determine that amount at which each of the following accounts will be reported in the company's year 1 income statement.

1.Fees Earned

2.Travel Expense

3.Insurance Expense

4.Rent Expense

5.Office Supplies Expense

6.Utilities Expense

7.Depreciation Expense: Equipment

8.Interest Expense

9.Salaries Expense

10.Income Taxes Expense

c.The unadjusted trial balance reports dividends of $3,000. As of December 31, year 1, have these dividends been paid?