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 1^st 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.