# FOR review

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.