Question

Question 2 PIERSON MARKETING AGENCY Income Statement Month Ended June 30 $28,000 Revenues Contract revenues. Expenses Salary expense........................ Advertising expense.... Rent expense............... Depreciation expense.......... Total expenses.... Profit. $6,000 800 4,200 2.800 13.800 $6,800 Additional data: When the income statement was prepared, the company accountant neglected to take into consideration the following information: 1. A utility bill for $2,000 was received on the last day of the month for electric and gas service for the month of June. 2. A company sold and completed work on a marketing campaign for a client. The value was $28,000. The agency billed the client for the contract but has not yet been paid. 3. Supplies on hand at the beginning of the month were $3,000. The agency purchased additional supplies during the month for $2,500 in cash and $2,200 of supplies were on hand at June 30. agency purchased a new car at the beginning of the month for $16,800 cash. The car is expected to have a useful life of four years. 5. Salaries owed to employees at the end of the month total $5,300. The salaries will be paid on July Instructions Prepare a correct income statement.

Answer 1

	Revenues
	Contract Revenue		$28,000.00
Note 1	Add: Amount excluded		$28,000.00		$56,000.00
	Expenses
	Salary Expenses		$6,000.00
Note 2	Add: Salary outstanding		$5,300.00		$11,300.00
	Advertising Expenses				$800.00
	Rent Expense				$4,200.00
Note 3	Utilities Payable				$2,000.00
Note 4	Supplies	Opening	$3,000.00
		Add:Purchases	$2,500.00
		Less: Closing	$2,200.00		$3,300.00
	Depreciation Expense		$2,800.00
Note 5	Add: Depreciation on New Car		$350.00		$3,150.00
	Profit				$31,250.00
Notes:
1	Irrespective of the fact whether the customer paid for it or not, the revenue should be included
2	The salary dues to be paid on July 5, are for the month of June, so should be added
3	Utility expense should be included swince it is fopr the period of June
4	The cost of supplies as calculated above, should be taken as an expense
5	Depreciation has been calculated using Straight line basis, for 48 months (4 years), on the cost of $16,800, and 1 month of deprecition has been taken into expense