Winter Designs was organized on January 1, 2014, by Katie Brownsey. Winter Designs records all prepaid costs as expenses and revenue received in advance as revenue. At the end of the first year of operations, the trial balance had the following accounts:

Analysis reveals the following additional data:
1. On February 1, 2014, the company purchased a one-year insurance policy.
2. The one-year, 5% note payable was issued on March 1, 2014. Interest and principal are payable on the maturity date.
3. The equipment was purchased on March 2, 2014, and has an estimated useful life of eight years.
4. At December 31, 2014, there was $785 of supplies on hand.
5. At December 31, 2014, service revenue of $2,550 was unearned.
6. Service revenue earned but unbilled and unrecorded at December 31, 2014, totaled $1,275.
7. January 2015 rent of $600 was paid on December 31, 2014, and is included in Rent Expense.
Instructions
(a) Journalize the adjusting entries at December 31, 2014. (Adjustments are recorded annually.)
(b) Prepare an adjusted trial balance.
TAKING IT FURTHER If Winter Designs initially recorded all prepaid costs as assets and all revenue received in advance as a liability, would this result in different numbers in the adjusted trial balance than in (b)? Explain.

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WINTER DESIGNS Trial Balance December 31, 2014 Debit Credit Cash Accounts receivable Equipment Accounts payable Note payable K. Brownsey, capital K. Brownsey, drawings Service revenue Insurance expense Rent expense Salaries expense Supplies expense 16,600 26,000 80,000 14,820 44,000 60,000 40,000 121,400 4,020 7,800 59,900 5,900 $240,220 $240,220