Question

MARK CONSULTING ENGINEER TRIAL BALANCE DECEMBER 31, 2020
		Debit			Credit
Cash		$29,500
Accounts Receivable		56,600
Allowance for Doubtful Accounts					$776
Supplies		1,630
Prepaid Insurance		1,510
Equipment		33,500
Accumulated Depreciation-Equipment					6,314
Notes Payable					7,200
Common Stock					10,000
Retained Earnings					25,979
Service Revenue					117,759
Rent Expense		10,088
Salaries and Wages Expense		33,260
Utilities Expenses		1,150
Office Expense		790
		$168,028			$168,028

1.		Fees received in advance from clients $5,850, which were recorded as revenue.
2.		Services performed for clients that were not recorded by December 31, $4,949.
3.		Bad debt expense for the year is $1,565.
4.		Insurance expired during the year $474.
5.		Equipment is being depreciated at 10% per year.
6.		Mark gave the bank a 90-day, 10% note for $7,200 on December 1, 2020.
7.		Rent of the building is $776 per month. The rent for 2020 has been paid, as has that for January 2021, and recorded as Rent Expense.
8.		Office salaries and wages earned but unpaid December 31, 2020, $2,570.

part 1

From the trial balance and other information given, prepare annual adjusting entries as of December 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

part 2

Prepare an income statement for 2020. (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

part 3

Prepare a retained earnings statement for 2020. Mark paid a $17,150 cash dividend during the year. (recorded in Retained Earnings.) (List items that increase owner's capital first.)

part 4

Prepare a classified balance sheet for 2020. (List current assets in the order of liquidity.)

Answer 1

Part 1:

Adjusting Entries:

	Date	Account title and Explanation	Debit	Credit
1	Dec 31,2020	Service revenue	$5,850
		Unearned revenue		$5,850
		[To record rectification entry for unearned revenue]
2	Dec 31,2020	Accounts receivable	$4,949
		Service revenue		$4,949
		[To record accrued service revenue]
3	Dec 31,2020	Bad debt expense	$1,565
		Allowance for doubtful accounts		$1,565
		[To record bad debt expense]
4	Dec 31,2020	Insurance expense	$474
		Prepaid insurance		$474
		[To record insurance expense]
5	Dec 31,2020	Deperciation expense [33,500 x 10%]	$3,350
		Accumulated depreciation-equipment		$3,350
		[To record depreciaton expense]
6	Dec 31,2020	Interest expense [7,200 x 10% x 1/12]	$60
		Interest payable		$60
		[To record accrued interest expense]
7	Dec 31,2020	Prepaid rent	$776
		Rent expense		$776
		[To record rectification entry for prepaid rent]
8	Dec 31,2020	Salaries and wages expense	$2,570
		Salaries and wages payable		$2,570
		[To record accrued salaries and wages]

Part 2:

Income Statement:

Mark Consulting Engineer
Income Statement
For the year Ended December 31,2020
Revenues:
Service Revenue		$116,858
Expenses:
Rent Expense	$9,312
Salaries and Wages Expense	$35,830
Utilities Expenses	$1,150
Office Expense	$790
Bad debt expense	$1,565
Insurance expense	$474
Depreciation expense	$3,350
Interest expense	$60
Total Expenses		$52,531
Net income		64,327

Part 3:

Statement of retained earnings:

Mark Consulting Engineer
Statement of retained earnings
For the year Ended December 31,2020
Retained earnings, Beginning*	$43,129
Add: Net income	64,327
Balance	$107,456
Less: Dividends	($17,150)
Retained earnings, Ending	$90,306

*Retained earnings, Beginning = 25,979 + 17,150 dividends already recorded = $43,129

Part 4:

Balance Sheet:

Mark Consulting Engineer
Balance Sheet
As of December 31,2020
Assets
Current assets:
Cash		$29,500
Accounts Receivable	$61,549
Allowance for Doubtful Accounts	($2,341)	$59,208
Supplies		$1,630
Prepaid Insurance		$1,036
Prepaid rent		$776
Total current Assets		$92,150
Property,plant,and equipment:
Equipment	$33,500
Accumulated Depreciation-Equipment	($9,664)
Property,plant,and equipment-Net		$23,836
Total Assets		$115,986
Liabilities and Stockholders' equity
Current Liabilities:
Notes Payable		$7,200
Interest payable		$60
Salaries and wages payable		$2,570
Unearned revenue		$5,850
Total liabilities		$15,680
Stockholders' Equity:
Common Stock	$10,000
Retained Earnings	$90,306
Total stockholders' equity		$100,306
Total liabilities and stockholders' equity		$115,986

Calculations:

Account title	Debit	Credit
Cash	$29,500
Accounts Receivable	56600+4949
Allowance for Doubtful Accounts		776+1565
Supplies	1,630
Prepaid Insurance	1510-474
Prepaid rent	776
Equipment	33,500
Accumulated Depreciation-Equipment		6314+3350
Notes Payable		7,200
Interest payable		60
Salaries and wages payable		2,570
Unearned revenue		5,850
Common Stock		10,000
Retained Earnings		25,979
Service Revenue		117759-5850+4949
Rent Expense	10088-776
Salaries and Wages Expense	33260+2570
Utilities Expenses	1,150
Office Expense	790
Bad debt expense	1,565
Insurance expense	474
Depreciation expense	3,350
Interest expense	60

Adjusted trial balance from the above calculations:

Adjusted Trial Balance
Account Title	Debit	Credit
Cash	$29,500
Accounts Receivable	$61,549
Allowance for Doubtful Accounts		$2,341
Supplies	$1,630
Prepaid Insurance	$1,036
Prepaid rent	$776
Equipment	$33,500
Accumulated Depreciation-Equipment		$9,664
Notes Payable		$7,200
Interest payable		$60
Salaries and wages payable		$2,570
Unearned revenue		$5,850
Common Stock		$10,000
Retained Earnings		$25,979
Service Revenue		$116,858
Rent Expense	$9,312
Salaries and Wages Expense	$35,830
Utilities Expenses	$1,150
Office Expense	$790
Bad debt expense	$1,565
Insurance expense	$474
Depreciation expense	$3,350
Interest expense	$60
Total	$180,522	$180,522

Income statement, Statement of retained earnings and balance sheet drawn from the above adjusted trial balance.