Question

Prepare adjusting entries and financial statements. (LO 2, 3, 4) P3-3A Alena Co. was organized on July 1, 2017. Quarterly financial statements are pre- pared. The unadjusted and adjusted trial balances as of September 30 are shown below. Adjusted Dr. $ 8,700 11,500 650 500 18,000 ALENA CO. Trial Balance September 30, 2017 Unadjusted Dr. Cash $ 8,700 Accounts Receivable 10,400 Supplies 1,500 Prepaid Rent 2,200 Equipment 18,000 Accumulated Depreciation Equipment S -0- Notes Payable 10,000 Accounts Payable 2,500 Salaries and Wages Payable Interest Payable -0- Unearned Rent Revenue 1,900 Owner's Capital 22.000 Owner's Drawings 1,600 Service Revenue 16,000 Rent Revenue 1,410 Salaries and Wages Expense 8,000 Rent Expense 1,900 Depreciation Expense Supplies Expense Utilities Expense 1,510 Interest Expense $53,810 $53,810 $ 700 10,000 2.500 725 100 450 22,000 1,600 17.100 2.860 8,725 3,600 700 850 1,510 100 $56,435 $56,435 (b) Net income $4,475 Ending capital $24,875 Total assets $38,650 Instructions (a) Journalize the adjusting entries that were made. (b) Prepare an income statement and an owner's equity statement for the 3 months ending September 30 and a balance sheet at September 30. (c) If the note bears interest at 12%, how many months has it been outstanding?

Answer 1

Answer :

Date	Account title and Explanation	Debit ($)	Credit ($)
Sep. 30	Accounts Receivable	1,100
	Service Revenue		1,100
Sep.30	Rent Expense	1,700
	Prepaid Rent Expense		1,700
Sep. 30	Supplies Expense	850
	Supplies		850
Sep. 30	Depreciation Expense	700
	Accumulated depreciation - Equipment		700
Sep. 30	Interest Expense	100
	Interest payable		100
Sep. 30	Unearned Rent Revenue	1,450
	Rent Revenue		1,450
Sep.30	Salaries and Wages Expense	725
	Salaries and Wages payable		725

(b)

ALENA CO. Income Statement For the Quarter Ended September 30. 2017
Revenues
Service Revenue	$17,100
Rent Revenue	2,860
Total Revenue		$19,960
Expenses
Salaries and wages expense	$8,725
Rent expense	3,600
Supplies expense	850
Utilities expense	1,510
Depreciation expense	700
Interest expense	100
Total Expenses		15,485
Net income		$4,475

ALENA CO. Owner's Equity Statement For the Quarter Ended September 30. 2017
Owner's capital July 1.2017	22,000
Add : Net Income	4,475
Less : Dividends	1,600
Owner's Equity September 30.2017	$24,875

,

ALENA CO. Balance sheet At September 30. 2017
Current assets :
Cash	$8,700
Accounts receivable	11,500
Supplies	650
Prepaid rent expense	500
Total current assets		$21,350
Equipment	18,000
Less : Accumulated depreciation	(700)	17,300
Total assets		$38,650
Liabilities and Owner's Equity
Current liabilities
Notes payable	$10,000
Accounts payable	2,500
Unearned rent revenue	450
Salaries and wages payable	725
Interest payable	100	$13,775
Owner's Equity :
Owner's Capital July 1.2017	22,000
Add : Net income	4,475
Less : Dividends	(1,600)
Total owner's Equity		24,875
Total liabilities and Owner's Equity		$23,430

(c). Interest of 12% per year equals a monthly rate of 1% monthly interest is $100 ($10,000*1%). Since total interest expense is $100, the note has been outstanding one month

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