Question

The unadjusted trial balance for a company as of December 31, 2015 appears below. Debit Credit Cash $1,200 900 Accounts Receivable Prepaid Insurance Supplies Land Office Furniture 900 2,000 10,000 4,500 Accounts Payable 900 Unearned Revenue 1,500 Note Payable 5,500 Common Stock 3,000 Retained Earnings 7,400 Dividends 1,100 Service Revenues 4,100 Rent Expense 600 Salaries Expense 1.200 $22,400 $22,400 Additional Information: 1. The Company paid $900 for a one-year insurance policy on July 1, 2015 2. The office furniture was purchased on January 1, 2015 and is expected to have a nine-year life and no salvage. Depreciation for 2015 has not been recorded 3. The unearned revenue account was created when the Company was paid $1,500 for services to be rendered. Half of these services were rendered on December 31, 2015 4. The note payable represents a 8 month, 8% loan obtained from The Bank & Trust on October 1, 2015 5. The Company paid $600 on November 1, 2015 as annual rent for its warehouse. This amount was debited to rent expense. 6. The Company operates five days per week (M-F) with a weekly payroll of $500. The Company pays its employees every Friday December 31, 2015 is a Wednesday. These wages have yet to be recorded. 7. Supplies on hand at December 31, 2015 had a cost of $600.

Answer 1

6.Correcting entry for number 1

Rent expense for period July-Dec is accrued and hence should be booked as an expense in current year

=$900/12*6months

=$450 debit to insurance expense and credit prepaid insurance expense by $450

Answer C

Question 6: correcting entry for no. 4

Interest expense from October - December (3 months) is accrued so will be debited to interest expense and credited to interest payable

=$5,500*8%/12*3

=$110

Answer B debit to interest expense $110

Question 7:number 5

As $600 is for annual rent , we should expense only the rent for period Nov and Dec

rent for other months are prepaid.

$600/12*2

=$100 is rent expense

$500 is prepaid rent ($600-$100)

Answer A debit to prepaid rent $500

Question 8:

$500 is for 5days

we will calculate salary due for 3 days from last payment(Monday Tuesday Wednesday)

=$500/5 * 3

=$300 should be added to salary expense

salary expense balance = $1200+$300

=$1500

Answer D

Question 9

Sr. No.	Net income
1	($450)	insurance expense will reduce net income
2	($500)	$500[4500/9]depreciation for 2015 will reduce net income
3	$750	$750[1500/2]As half of service is rendered the sales revenue will be recorded thereby increasing et income
4	($110)	$110 interest expense on note payable will reduce net income
5	$500	$500 will be prepaid rent which will reduce rent expense.increasing net income
6	($300)	$300 increase in salary expense will reduce net income
7	($1,400)	($2000-$600)=$1400 worth of supplies are used and should be recorded as an expense
	($1,510)	Changes in net income

Net income as per un adjusted trial balance= sales revenue -rent expense-salary expense

=$4,100-$600-$1,200

=$2,300

Net income= Unadjusted net income-change in net income

$2,300-$1,510

=$790

Answer A