Question

The trial balance of Pacilio Security Services, Inc. as of January 1, Year 4, had the following normal balances: Cash Accounts Receivable Supplies Prepaid Rent Land Unearned Revenue Salaries Payable Common Stock Retained Earnings $12,500 3,500 120 1,000 4,000 900 1,000 8,000 11,220 In Year 4, Pacilio Security Services decided to expand its business to sell security systems and offer 24-hour alarm monitoring services It plans to phase out its current service of providing security personnel at various events. The following summary transactions occurred during Year 4 1. Paid the salaries payable from Year 3 2. Acquired an additional $42,000 cash from the issue of common stock. 3. Rented a larger building on May 1; paid $6,000 for 12 months' rent in advance 4. Paid $800 cash for supplies to be used over the next several months by the business. 5. Purchased alarm systems for resale at a cost of $12,000. The alarm systems were purchased on account with the terms 2/10, n/30 6. Returned alarm systems that had a cost of $240 7. Installed alarm systems during the year for a total sales amount of $20,000. Sales of $15,000 were on account, while $5,000 were cash sales 8. The cost of the systems sold in Event 7 amounted to $9,440 9. Paid the installers and other employees a total of $9,500 in salaries 0. Sold $36,000 of monitoring services for the year. The services are billed to the customers each month. 11. Paid cash on accounts payable. The payment was made before the discount period expired. At the time of purchase, the inventory has a cost of $8,000 and was purchased under the terms 2/10, n/30 12. Paid cash to settle additional accounts payable in the amount of $2,780. The payment was made after the discount period expired. 13. Collected $43,000 of accounts receivable during the year 14. Performed $12,000 of security services for area events; $9,000 was on account and $3,000 was for cash. 15. Paid advertising cost of $1,620 for the year. 16. Paid $1,100 for utilities expense for the year 17. Paid a dividend of $12,000 to the shareholders. Adjustment Information

Answer 1

Pacilio Security Services, Inc.
Income Statement
For the year Ended December 31, Year 4
Revenues:
Sales revenue	$20,000
Service revenue	$48,900
Total Revenues
Less: Sales returns and allowance	$0
Net revenues		$68,900
Expenses:
Cost of goods sold	$9,440
Salaries Expense	$11,000
Advertising expense	$1,620
Utilities expense	$1,100
Supplies expense	$770
Rent Expense	$4,000
Total expenses		$27,930
Net income		$40,970

Explanations:

Transaction	Account title	Amount
7	Sales revenue	$20,000
10	Service revenue	$36,000
14	Service revenue	$12,000
20	Service revenue from unearned revenue	$900
	Total Service revenue	$48,900
8	Cost of goods sold	$9,440
9	Total salaries paid (1,000+9,500)	$10,500
1	Salaries payable in Year 3	($1,000)
21	Salaries payable in Year 4	$1,500
	Total Salaries expense	$11,000
15	Advertising expense	$1,620
16	Utilities expense	$1,100
	Supplies Beginning balance	$120
	Supplies Purchases	$800
	Supplies Ending balance	($150)
18	Supplies expense	$770
19	Rent expense (6,000 x 8/12)	$4,000

Assumed that Unearned revenue related to Services