MPS, Inc. has the following unadjusted account balances as of December 31, 2015, the company’s year- end:
• Cash: $ 430,000
• Accounts Receivable: $ 2,000
• Prepaid Insurance: $ 14,000
• Prepaid Rent: $ 22,000
• Equipment: $ 60,000
• Accumulated Depreciation— Equipment: $ 0
• Accounts Payable: $ 10,000
• Common Stock: $ 16,000
• Sales Revenue: $ 823,100
• Wage Expense: $ 290,400
• Utilities Expense: $ 11,200
* Exercises and problems that can be solved using Excel are indicated with the symbol, . .
• Insurance Expense: $ 8,500
• Rent Expense: $ 11,000
• Depreciation Expense— Equipment: $ 0 At year- end, MPS makes adjusting journal entries to properly record revenues and expenses. The following information applies to the adjusting journal entries:
• The prepaid insurance balance relates to an insurance policy purchased on January 1, 2015, that covers the period of 1 / 1 / 15 – 12 / 31/ 15. 1 / 1 / 15 – 12 / 31 / 15.
• The prepaid rent balance relates to rent paid in June 2015 to cover the period of 7/ 1/ 15– 6/ 30/ 16.7 / 1 / 15 – 6 / 30 / 16.
• Wages for 2015 in the amount of $ 26,000 will be paid after year- end and have not yet been recorded.
• MPS purchased the equipment in the beginning of January 2015 and will depreciate it on a yearly basis. No depreciation has been recorded yet. The equipment has a useful life of 15 years, no residual value, and will be depreciated on a straight- line basis.
Prepare the journal entries necessary to record the adjustments at year- end.