Problem 1 - Adjusting entries and account classification (25 points)

Selected amounts from Happy Company's trial balance of 12/31/2020 appear below:

1. Accounts Payable	$ 160,000
2. Accounts Receivable	150,000
3. Accumulated DepreciationEquipment	200,000
4. Allowance for Doubtful Accounts	20,000
5. Bonds Payable (due 8/31/2025)	500,000
6. Cash	150,000
7. Common Stock	60,000
8. Equipment	840,000
9. Insurance Expense	30,000
10. Interest Expense	10,000
11. Merchandise Inventory	300,000
12. Notes Payable (due 6/1/2021)	200,000
13. Prepaid Rent	150,000
14. Retained Earnings	818,000
15. Salaries and Wages Expense	328,000

(All of the above accounts have their standard or normal debit or credit balance.)

Part A. Indicate the proper balance sheet and income statement classification of each of the 15 numbered accounts in the 12/31/2020 trial balance before adjustments. Use the following account titles.

Example: c_ 1. Accounts Payable

1. Current assets f. Revenues
2. Property, plant, and equipment g. Expenses
3. Current liabilities
4. Long-term liabilities
5. Stockholders' equity

Part B. Prepare adjusting journal entries at year end, December 31, 2020, based on the following supplemental information.

1. The equipment has a useful life of 15 years with no salvage value. (Straight-line method being used.)
2. Interest accrued on the bonds payable is $15,000 as of 12/31/2020.
3. Expired insurance at 12/31/2020 is $20,000.
4. The rent payment of $150,000 covered the six months from November 30, 2020 through May 31, 2021.
5. Salaries and wages earned but unpaid at 12/31/2020, $22,000.