Adjusting Entries Your examination of the records of the Sullivan Company provides the following information for the December 31, 2007 year end adjustments:
1. Bad debts are to be recorded at 2% of sales. Sales totaled $25,000 for the year.
2. Salaries at year end that have accumulated but have not been paid total $1,400.
3. Annual straight line depreciation for the company’s equipment is based on a cost of $30,000, an estimated life of eight years, and an estimated residual value of $2,000.
4. Prepaid insurance in the amount of $800 has expired.
5. Interest that has been earned but not collected totals $500.
6. Unearned rent in the amount of $1,000 has become earned.
7. Interest on a note payable that has accumulated but has not been paid totals $600.
8. The income tax rate is 30% on current income and is payable in the first quarter of 2008. The pretax income before the preceding adjusting entries is $6,800.
Prepare the adjusting entries to record the preceding information.