Evaluate and complete the recording process for adjusting entriesThe following information relates to Fanning's Electronics on December 31, 2017. The company, which uses the calendar year as its annual reporting period, initially records prepaid and unearned items in balance sheet accounts (assets and liabilities, respectively).

Eighteen months earlier, on July 1, 2016, the company purchased equipment that cost $20,000. Its useful life is predicted to be five years, at which time the equipment is expected to be worthless (zero salvage value).