Excalibur Corporation manufactures and sells video games for personal computers. The unadjusted trial balance as of December 31, 2011, appears below. December 31 is the company's fiscal year-end. The company uses the perpetual inventory system.
Information necessary to prepare the year-end adjusting entries appears below.
1. The equipment was purchased in 2009 and is being depreciated using the straight-line method over an eight-year useful life with no salvage value.
2. Accrued wages at year-end should be $4,500.
3. The company estimates that 2% of all year-end accounts receivable will probably not be collected.
4. The company borrowed $30,000 on September 1, 2011. The principal is due to be repaid in 10 years. Interest is payable twice a year on each August 31 and February 28 at an annual rate of 10%.
5. The company debits supplies expense when supplies are purchased. Supplies on hand at year-end cost $500.
6. Prepaid rent at year-end should be $1,000.
Prepare the necessary December 31, 2011, adjusting entries.