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.
