Question

) Figgaro Company's accounts and their balances, as of the end of August, are included below. All accounts have normal balances:

Accounts receivable….. $36,000 Cash……………………. $27,000 Equipment…………….. 59,000 Advertising expense… 5,000 Service revenues earned. 75,000 Accounts payable……… 31,000 Rent expense………….. 3,600 Dividends……………... 24,000 Office supplies……… 1,500 Salaries expense……….. 30,000 Notes payable………… 22,000 Common Stock…….. 58,100

a. Calculate net income.

b. Determine the amount of total equity to be shown on the August 31 balance sheet.

2) List the four steps in recording transactions

3) Prepare adjusting entries for the year ended December 31, for each of these separate situations. Assume that prepaid expenses are initially recorded in asset accounts and that fees collected in advance are initially recorded as liabilities.

a. The Prepaid Rent account has a debit balance of $8,000 before adjustment, representing a prepayment for four months' rent made on December 1 of the current year.

b. One-third of the work related to $18,000 of cash received in advance was performed during this period.

c. Unpaid accrued salaries at December 31 amounts to $15,000

d. Work was completed for a client on December 31 in the amount of $21,000, but was not previously billed or recorded. e. Estimated depreciation on office equipment is $27,000.

Answer 1

1)

Income Statement
Revenues
Service Revenue		$        75,000
Expenses
Rent Expense	$           3,600
Salaries Expense	$        30,000
Advertising Expense	$           5,000
Total Expenses		$        38,600
Net Income		$        36,400

Statement of Equity
	Common Stock	Retained Earnings	Total Equity
Beginning Balance	$        58,100	$                 -	$        58,100
Add : Net income	$                 -	$        36,400	$        36,400
Less Dividend	$                 -	$        24,000	$        24,000
Ending Balance	$        58,100	$        12,400	$        70,500

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