Question

The trial balance for Cozy Fireplaces Inc. for December 31, 2020, follows: Credit balances Debit balances $ 88,300 38,100 95,400 5,000 46,700 79,800 151,000 $19,635 21,400 Cash Accounts receivable Inventory Supplies Prepaid rent Land Building Accumulated depreciation, building Accounts payable Wages payable Interest payable Income tax payable Unearned revenue Bank loan payable Common shares Retained earnings Sales revenue Cost of goods sold Wages expense Rent expense Supplies expense Depreciation expense Interest expense Miscellaneous expenses Income tax expense Dividends declared 12,500 40,000 151,000 7,565 849,000 481,800 94,800 0 14,200 6,000 $1,101,100 Totals $1,101,100 Additional information for adjusting entries:

Answer 1

Prepare Adjusting entries as follows:

Credit Trn. Account Title 1 Unearned revenue Sales revenue ($12500 x 3/4) Debit $9,375 $9.375 $2.000 2 Wages expense Wage payable $2,000 $42.600 3 Rent Expense ($3000 x 6) +(84100 6) Prepaid Rent $42.600 $4,600 4 Supplies Expense (S5000-400) Supplies $4.600 $6,545 5 Depreciation expense Accumulted depreciation-Building [($151000-520100) = 20 years] $6,545 $2,700 6 Interest Expense Interest payable (S40000 x 9% ~ 9/12) $2.700 $62.739 7 Income Tax Expense Income tax payable (See working) $62.739

Working as follows:

Income statement
Revenue:
Sales revenue ($849000+$9375)		$858,375
Less: COGS		($481,800)
Gross profit		$376,575
Less: Expenses:
Wage Expense ($94800+$2000)	$96,800
Rent Expense	$42,600
Supplies Expense	$4,600
Depreciation Expense	$6,545
Interest Expense	$2,700
Miscellaneous expense	$14,200	$167,445
Profit before tax		$209,130
Income Tax ($209130 × 30%)		($62,739)
Net Income		$146,391