Chapter 4, Problem 4.12E

Adjusting Journal Entries: T-accounts. Fanatical Fashions, a department store, has the following unadjusted account balances as of December 31, 2018, the company’s year-end:

• Cash: $3,230,000
• Accounts Receivable: $1 240 000
• Prepaid Insurance: $252,000
• Prepaid Rent: $480,000
• Buildings: $3,540,300
• Accumulated Depreciation—Buildings: $360,000
• Accounts Payable: $980,000
• Wages Payable: $420,000
• Note Payable: $360,000
• Common Stock: $1,000,000
• Sales Revenue: $7,460,300
• Wage Expense: $1,120,000
• Utilities Expense: $94,000
• Insurance Expense: $120,000
• Interest Expense: $234,000
• Rent Expense: $260,000
• Depreciation Expense—Buildings: $0

At year-end, Fanatical Fashions makes necessary adjusting journal entries to properly record revenues and expenses for the year. The following information applies to the adjusting journal entries:

• The prepaid insurance balance relates to a two-year insurance policy purchased in June that covers the period of July 1, 2018 to June 30. 2020.
• The prepaid rent balance relates to rent that was paid in January to cover the company’s facilities for the current year
• Wages for the year in the amount of $236,000 will be paid after year end and have not yet been recorded
• Fanatical purchased the buildings in the beginning of the year and depreciates on a yearly basis. It must record a lull year of depreciation at the end of 2018. The buildings have no residual value a 30 year estimated useful life and will be depreciated on a straight-line basis.
• Fanatical has not yet recorded interest expense for 2018 on the note payable in the amount of $16,000.

Prepare the journal entries necessary to record the adjustments at year end Omit explanations.