Question

P4-7 Recording Adjusting and Closing Entries, Preparing a Statement of Earnings Including Earnings per Share, and Preparing a Statement of Financial Position (AP4-7) It is your first day on the job as a trainee for an entry position in the accounting department of Alimex Inc., a merchandising company. The company controller provides you with the following unadjusted trial balance as at December 31, 2017, with accounts listed in alphabetical order.

Answer 1

Adjusting entries as follows:

Trn. Account Credit Debit $8.000 Wages expense Wages payable $8.000 $400 Interest receivable Interest revenue ($24,000 < 5% x 4/12) $400 $7,000 Rent expense Prepaid rent ($16800/12) x 5 months] $7,000 $3,000 Depreciation expense-equipment Accumulated depreciation-equipment $3,000 $15,000 Dividends (15,000 shares S1) Dividends payable $15,000 $6,040 Income tax expense Prepaid income taxes Income tax payable $1,040 $5,000

Prepare income statement as follows:

Income statement
Sales revenue:		$301,000
Less: Cost of sales		($129,000)
Gross margin		$172,000
Interest revenue		$400
Less: Operating expense
Wages expense ($111,800+$8000)	$119,800
Rent expense ($11,000+$7000)	$18,000
Depreciation expense	$3,000
other operating expense	$1,400	$142,200
Income before tax		$30,200
Income tax ($30,200 × 20%)		($6,040)
Net Income		$24,160

________________________________________________________

Prepare t-accounts as follows:

Wage expense
Beg. Bal.	$111,800
a	$8,000
End. Bal	$119,800
Wage payable
		Beg. Bal.	-
		a	$8,000
		End. Bal	$8,000
Interest receivable
Beg. Bal.	-
b	$400
End. Bal	$400
Interest revenue
		Beg. Bal.	-
		b	$400
		End. Bal	$400
Prepaid rent
Beg. Bal.	$16,800	c	$7,000
End. Bal	$9,800
Rent expense
Beg. Bal.	$11,000
c	$7,000
End. Bal	$18,000
Depreciation expense
Beg. Bal.	-
d	$3,000
End. Bal	$3,000
Accumulated depreciation -equipment
		Beg. Bal.	$9,000
		d	$3,000
		End. Bal	$12,000
Dividends
Beg. Bal.	-
e	$15,000
End. Bal	$15,000
Dividends payable
		Beg. Bal.	-
		e	$15,000
		End. Bal	$15,000
Income tax expense
Beg. Bal.	-
f	$6,040
End. Bal	$6,040
Prepaid Income tax
Beg. Bal.	$1,040	f	$1,040
End. Bal	$0
Income tax payable
		Beg. Bal.	-
		f	$5,000
		End. Bal	$5,000

Answer 2

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