Jay, Inc., a party rental business, completed its third year of operations on December 31. Because this is the end of the annual accounting period, the company bookkeeper prepared the following tentative income statement:
Income Statement | ||
Rent revenue | $ | 102,000 |
Expenses: | ||
Salaries and wages expense | 25,800 | |
Maintenance expense | 10,300 | |
Rent expense | 7,600 | |
Utilities expense | 3,700 | |
Gas and oil expense | 2,200 | |
Miscellaneous expenses (items not listed elsewhere) | 1,100 | |
Total expenses | 50,700 | |
Income | $ | 51,300 |
You are an independent CPA hired by the company to audit the company's accounting systems and review the financial statements. In your audit, you developed additional data as follows:
Required:
1. What adjusting entry for each item (a) through (g) should Jay record at December 31?
2. Prepare a corrected income statement for the current year in good form, including earnings per share, assuming that 6,900 shares of stock are outstanding all year.
3. Compute the total asset turnover ratio based on the corrected information. Assume the beginning-of-the-year balance for Jay's total assets was $59,820 and its ending balance for total assets was $66,980.
Transaction | General Journal | Debit | Credit |
a. | Salaries and wages expense | $730 | |
Salaries and wages payable | $730 | ||
( To record salaries and wages expense) | |||
b. | Telephone expense | $390 | |
Telephone expense payable | $390 | ||
( To record telephone expense) | |||
c. | Depreciation expense | $23,900 | |
Accumulated depreciation - Equipment | $23,900 | ||
( To record depreciation expense) | |||
d. | Interest expense | $330 | |
Interest payable | $330 | ||
( To record interest expense) | |||
e. | Maintenance expense | $1,600 | |
Maintenance supplies | $1,600 | ||
( To record supplies expense) | |||
f. | No Entry, since revenue is not yet earned, it will be posted when it is earned | ||
g. | Income tax expense | $5,300 | |
Income tax payable | $5,300 | ||
( To record income tax expense) |
Interest expense = Note payable x Interest rate x 3/12
= 12,000 x 11% x 3/12
= $330
Jay Inc.
Income Statement for the year ended December 31...
$ | $ | |
Operating Revenues (102,000 - 5,500) | 102,000 | |
Operating Expenses: | ||
Salaries and Wages Expense $ ( 25,800+ 730) | 26,530 | |
Telephone Expense | 390 | |
Maintenance Expense $ ( 10,300 + 1,600) | 11,900 | |
Rent Expense | 7,600 | |
Utilities Expense | 3,700 | |
Gas and oil expense | 2,200 | |
Miscellaneous Expense | 1,100 | |
Depreciation Expense | 23,900 | |
Total Operating Expenses | 77,320 | |
Operating Income | 24,680 | |
Interest Expense ( $ 12,000 x 11% x 3/12) | 330 | |
Income before taxes | 24,350 | |
Income Tax Expense | 5,300 | |
Net Income | 19,050 | |
Earning per Share (19050/6900) | 2.76 |
Average Total Assets | ($59,820+$66,980)/2 | $ 63,400 | b |
Rent Revenue | $ 102,000 | a | |
Total Asset turnover | 1.61 | a/b |
Jay, Inc., a party rental business, completed its third year of operations on December 31. Because...
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Required information [The following information applies to the questions displayed below.) Dyer, Inc., completed its first year of operations on December 31, 2018. Because this is the end of the annual accounting period, the company bookkeeper prepared the following preliminary income statement: $113,500 Income Statement, 2018 Rent Revenue Expenses: Salaries and Wages Expense $28,400 Repairs and Maintenance Expense 12,900 Rent Expense 8,900 Utilities Expense 3,900 Travel Expense 2,900 Total Expenses Income 57,000 $ 56,500 You are an independent CPA hired...
Required information [The following information applies to the questions displayed below.] Dyer, Inc., completed its first year of operations on December 31, 2018. Because this is the end of the annual accounting period, the company bookkeeper prepared the following preliminary income statement: $113,500 Income Statement, 2018 Rent Revenue Expenses: Salaries and Wages Expense $28,400 Repairs and Maintenance Expense 12,900 Rent Expense 8,900 Utilities Expense 3,900 Travel Expense 2,900 Total Expenses Income 57,000 $ 56,500 You are an independent CPA hired...
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