Question

USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT (5) QUESTIONS Magic Cleaning Services has a fiscal year end of December 31st. It is in its first year of operations As of December 31, Magic has the following unadjusted trial balance Account Cash Accounts Receivable Supplies Equipment Accounts Payable Unearned Service Revenue Common Stock Retained Earnings Service Revenue Wage Expense Rent Expense Utilities Expense Administrative Expense Debit $430,900 $158,000 $111,000 $120,000 Credit $ 45,900 $ 113,600 $100,000 $649,200 $ 48,600 $ 18,000 $ 6,200 16,000 $ 908,700 TOTALS $908,700 In addition, Magic has not yet adjusted for the following 1. The equipment was purchased on March 1 of the current year. It has a 10-year life, 10% salvage value and Magic uses the double declining balance method for depreciation. Magic records depreciation to the nearest full month 2. On March 1, Magic prepaid $18,000 for 12 months of rent on an office/warehouse. The original entry was recorded as Rent Expense 3. By December 31st, 60% of the services related to the Unearned Revenues had been performed 4. Wages of $5,700 should be accrued and are scheduled to be paid on January 2 5. Supplies of $33,000 were still on hand at year end 6. Based on industry averages, it is estimated that 3% of the accounts receivable will prove to be uncollectible

Answer 1

Computing the net income after all adjustments in excel sheet:

Company M Income Statement For the vear ended December 31 Particulars Amount(S)Amount(S) Amount(S) 4 5 Service Revenue 6 Unearned income (30% 7 Net Service Revenue 8 Less: Change in inventory 619200 108000*30% Depreciation on Building:Amount(S) Buildin Salvage Value Life(years) -B5+B6 G7*10% 30 -(G7-G8) G9 Stock of supplies 111000 98000 -B9-B10 10 Closing Stock of supplies 11 Less: Expenses 12 Bad debts (3%* 158000 13 14 Rent Expense 15 Wages Expense 16 Utilities Expense 17 Administrative Expense 18 Total operating expenses (B) 19 Net Income reciation ear reciation for 10 months (G10/12)*10 -58000*3% 2250 2480 4600 6200 16000 reciation on machine Rent for 10 months Rent for two months 12400 (G14*2)/10 -SUM(B12:B17 -C7-C10-C18
?Presenting the results of above excel sheet:

Company M Income Statement For the vear ended December 31 Particulars Amount(S) Amount(S) Amount(S) Service Revenue Unearned Income (30% Net Service Revenue Less: Change in invento 619,200 32,400 Depreciation on Building: Amount(S) Buildin Salvage Value Life(years) 651,600 90,000 9,000 30 2,700 2,250 Stock of supplies 111,000 98,000 Closing Stock of supplies Less: Expenses Bad debts (3%*158000 13,000 reciation ear reciation for 10 months 4740 2250 2480 4600 6200 16000 eciation on machine 12400 2480 Rent Expense Wages Expense Utilities Expense Administrative Expense Total operating expenses (B) Net Income Rent for 10 months Rent for two months 36.270 602.330