Question

P4-26A The unadjusted T-accounts of Paladdin Investment Advisers, at Decem- ber 31, 2007, and the related year-end adjustment data follow. Accounts Receivable Bal. 36,000 Supplies 9,000 Equipment Bal. 99,000 Bal. Salary Payable Accounts Payable Bal. 6,000 Unearned Service Revenue Bal. 5,000 S. Paladdin, Capital Bal. 36,000 S. Paladdin, Withdrawals Bal. 62,000 Supplies Expense Salary Expense Bal. 53,000 Interest Expense Bal. 6,000 Rent Expense Bal. 15,000 Insurance Expense Bal. 7,000 Adjustment data at December 31, 2007: a. Unearned service revenue earned during the year, $1,000. b. Supplies on hand, $1,000. c. Depreciation for the year, $9,000. d. Accrued salary expense, $1,000. e. Accrued service revenue, $2,000. Requirements 1. Enter the account data in the Trial Balance columns of a work sheet, and complete the work sheet. Key each adjusting entry by the letter corresponding to the data given. List all the accounts, including those with zero balances. Leave a blank line under Service Revenue. (p. 198) 2. Prepare the income statement, the statement of owner's equity, and the classified balance sheet in account format. (p. 203) 3. Did Paladdin have a good or a bad year during 2007? Give the rea- son for your answer. (Challenge)

Answer 1

Dear Student ,

Below answer based on couple of adjustment based on T account and   derived adjusted Trial Balance and with help of TB , derived Income Statement + Balance Sheet .

Please see line wise adjustment , Any doubt , please drop message .

Thank You!!

	Before adjustment		Adjustment		After Adjusted TB		Adjustment No
	Debit($)	Credit($)	Debit($)	Credit($)	Debit($)	Credit($)
Cash	15,000				15,000
Account Receivable	36,000		2,000		38,000		e
Supplies	9,000			8,000	1,000		b
Equipment	99,000				99,000
Accumulated depreciation		13,000		9,000	-	22,000	c
Accounts Payable		6,000				6,000
Salary Payable				1,000		1,000	d
Unearned Service Revenue		5,000	1,000			4,000	a
Note Payable - Long term		60,000				60,000
Capital		36,000				36,000
Withdrawl	62,000				62,000
Service Revenue		1,82,000		3,000		1,85,000	(a+e)
Salary Expense	53,000		1,000		54,000		d
Supplie Expenses			8,000		8,000		after b
Depreciation Expenses			9,000		9,000
Interest Expense	6,000				6,000
Rent Expenses	15,000				15,000
Insurance Expense	7,000				7,000
Total	3,02,000	3,02,000	21,000	21,000	3,14,000	3,14,000

Derived Income Statement
		Amnt($)	Amnt($)
Revenue			1,85,000
Cost
Salary Expense		54,000
Supplie Expenses		8,000
Depreciation Expenses		9,000
Interest Expense		6,000
Rent Expenses		15,000
Insurance Expense		7,000
Total Cost(Expenses)			99,000
Net Profit			86,000

Derived Balance Sheet as on 31st Dec 2007
	Amnt($)	Amnt($)		Amnt($)	Amnt($)
Current Asset			Current Liability
cash		15,000	Accounts Payable		6,000
Account Receivable		38,000	Salary Payable		1,000
Supplies		1,000	Unearned Service Revenue		4,000
Total Current Assets		54,000	Total Current Liability		11,000
Property Plant and Equipment			Note Payable - Long term		60,000
Book value	99,000		Total Liability		71,000
Less-			Owners Equity
Accumulated Depreciation	22,000		Opening Bal	36,000
Net Asset		77,000	Add- Net Profit current Month	86,000
			Total	1,22,000
			Less- Withdraw	62,000	60,000
Total Assets		1,31,000	Total Liability+ Equity		1,31,000

Overall Income Statement provides that company is making good amount of net profit and maintain good Margin . Looks like Paladin having good year in 2007