FOR review

    • This homework is to be done individually.

    • Word-process solutions within this template. Copy and paste tables from Excel as needed.

    • Show all steps used in arriving at the final answers. Incomplete solutions not accepted

 

 

Problem 1

Shown below is a tentative income statement after the first year of operations.

 

Income Statement

December 31

Rental revenue

 

$89,900

Expenses

   

  Salaries and wages expense

$22,000

  Maintenance expense

8,000

  Rent expense

 

9,200

  Utilities expense

 

5,200

  Other expenses

 

2,000

Total expenses

 

$46,400

Income

 

$43,500

 

Suppose there are additional transactions shown below, that were not recorded or paid.

(a)    The Unearned Rental Revenue account includes $6,300 of revenue to be earned in the next year.

(b)   There were additional wages for the last five days of the year amounting to $650.

(c)    Maintenance expense excludes $2,300 representing the cost of maintenance supplies during the year

(d)   The company estimated additional utilities for the last month amounting to $550.

(e)   Depreciation on equipment amounted to $16,000 for the year.

(f)     There is interest on a $10,000, one-year, 6 percent note payable dated November 1st of the year. The interest is payable on the maturity date of the note.

(g)    The income tax expense is $3,900 and payment of the income tax will be made the following year.

 

Find an adjusting entry for each transaction. If none is required, explain why. Prepare a corrected income statement for the year, including earnings per share. Assume that 5,000 shares of stock are outstanding all year. Compute the net profit margin based on the corrected information.
Problem 2

The adjusted trial balance of a company at the end of the accounting year, December 31, showed the following.

 

Account Titles

Debit

 

Credit

Cash

$16,000

   

Machinery

72,000

   

Accumulated depreciation

   

$12,800

Accounts payable

   

5,600

Capital Stock

   

16,000

Retained earnings

   

47,200

Service revenue

   

32,000

Interest expense

3,200

   

Operating expenses

13,600

   

Depreciation expense

8,800

   

Totals

$113,600

 

$113,600



Prepare all the required closing entries for the company at December 31. Calculate the year ending balance in retained earnings.

Problem 3
          

Suppose a company prepares the following unadjusted trial balance as of December 31.

 

Account Titles

Debit

 

Credit

Cash

$19,600

   

Accounts receivable

7,000

   

Supplies

1,300

   

Prepaid insurance

900

   

Equipment

27,000

   

Accumulated depreciation

   

$12,000

Other assets

5,100

   

Accounts payable

   

2,500

Wages payable

     

Income taxes payable

     

Note payable

 

5,000

Contributed Capital (3,000 shares outstanding all year)

   

16,000

Retained earnings

   

10,300

Service revenue

   

48,000

Other expenses

32,900

   

Income tax expenses

     

Totals

$93,800

 

$93,800

 

 

The following data has not been recorded at December 31.

(a)    Depreciation expense for the year, $3,000.

(b)   Wages earned by employees but not yet paid amount to $2,100.

(c)    The supplies count on December 31 reflected $800 remaining supplies on hand to be used the following year.

(d)   Insurance expired during the year, $450.

(e)   Income tax expense was $3,150.

 

Record the adjusting entries. Prepare an income statement with earnings per share assuming there are 3,000 shares. Prepare a classified balance sheet for the year. For the income statement and balance sheet, include the effects of the preceding five data items.

 
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