Question

Please answer all questions with all work

The following trial balance was taken from the books of Fisk Corporation on December 31, 2014. Account Debit Credit Cash $ 9,000 Accounts Receivable 40,000 Notes Receivable 10,000 Allowance for Doubtful Accounts $ 1,800 Inventory 44,000 Prepaid Insurance 4,800 Equipment 110,000 Accumulated Depreciation--Equip. 15,000 Accounts Payable 10,800 Common Stock 44,000 Retained Earnings 55,000 Sales Revenue 280,000 Cost of Goods Sold 126,000 Salaries and Wages Expense 50,000 Rent Expense 12,800 Totals $406,600 $406,600 Estima At year end, the following items have not yet been recorded. a. Insurance expired during the year, $2,000. Estimated bad debts, 1% of gross sales. c. Depreciation on equipment, 10% per year on original cost. d. Interest at 5% is receivable on the note for one full year. *e. Rent paid in advance at December 31, $5,400 (originally charged to expense). f. Accrued salaries and wages at December 31, $5,800. Instructions On the following pages: (a) Prepare the necessary adjusting entries. (18 Points) (b) Prepare a classified income statement (14 Points), a statement of retained earnings (9 Points), and an unclassified balance sheet (23 Points). (c) Prepare the necessary closing entries. (16 Points)

Answer 1

(a)

No.	Account Titles and Explanation	Debit	Credit
a.	Insurance expense	2000
	Prepaid insurance		2000
	(To record insurance expired)
b.	Bad debts expense (1% x $280000)	2800
	Allowance for doubtful accounts		2800
	(To record bad debts expense)
c.	Depreciation expense (10% x $110000)	11000
	Accumulated depreciation-equipment		11000
	(To record depreciation on equipment)
d.	Interest receivable (5% x $10000)	500
	Interest revenue		500
	(To record interest revenue accrued)
e.	Prepaid rent	5400
	Rent expense		5400
	(To record unexpired rent)
f.	Salaries and wages expense	5800
	Salaries and wages payable		5800
	(To record accrued salaries and wages)

(b)

Fisk Corporation
Income Statement
For the Year Ended December 31, 2014
Sales revenue		280000
Cost of goods sold		126000
Gross margin		154000
Less: Operating expenses
Salaries and wages expense ($50000 + $5800)	55800
Rent expense ($12800 - $5400)	7400
Insurance expense	2000
Bad debts expense	2800
Depreciation expense	11000	79000
Income from operations		75000
Other revenues and expenses
Interest revenue		500
Net income $		75500
Fisk Corporation
Statement of Retained Earnings
For the Year Ended December 31, 2014
Retained earnings, beginning balance	55000
Add: Net income for the year	75500
Retained earnings, ending balance	130500
Fisk Corporation
Balance Sheet
December 31, 2014
Assets
Cash		9000
Accounts receivable	40000
Less: Allowance for doubtful accounts	4600	35400
Notes receivable		10000
Interest receivable		500
Inventory		44000
Prepaid insurance ($4800 - $2000)		2800
Prepaid rent		5400
Equipment	110000
Less: Accumulated depreciation ($15000 + $11000)	26000	84000
Total assets		191100
Liabilities and Stockholders' Equity
Accounts payable		10800
Salaries and wages payable		5800
Common stock		44000
Retained earnings		130500
Total liabilities and stockholders' equity		191100

(c)

No.	Account Titles and Explanation	Debit	Credit
1	Sales revenue	280000
	Interest revenue	500
	Income summary		280500
	(To close the revenue accounts)
2	Income summary	205000
	Cost of goods sold		126000
	Salaries and wages expense		55800
	Rent expense		7400
	Insurance expense		2000
	Bad debts expense		2800
	Depreciation expense		11000
	(To close the expense accounts)
3	Income summary ($280500 - $205000)	75500
	Retained earnings		75500
	(To close the income summary account)