Question

Windsor, Inc. was founded in January 2017. Presented below are adjusted and unadjusted trial balances as at December 31, 2020. 

Answer 1

Adjusting entries:

Date	Account title and Explanation	Debit	Credit
Dec.31	Accounts receivable	$3,290
	Service revenue		$3,290
	[To record revenue earned]
Dec.31	Unearned revenue	$1,320
	Service revenue		$1,320
	[To record revenue previously collected]
Dec.31	Supplies expense	$5,080
	Supplies		$5,080
	[To record supplies used]
Dec.31	Depreciation expense	$4,700
	Accumulated depreciation-equipment		$4,700
	[To record depreciation expense]
Dec.31	Interest expense	$150
	Interest payable		$150
	[To record interest expense]
Dec.31	Insurance expense	$800
	Prepaid insurance		$800
	[To record expired insurance]
Dec.31	Salaries and wages expense	$1,220
	Salaries and wages payable		$1,220
	[To record salaries accrued owing to employees]

Income Statement:

WINDSOR, INC.
Income Statement
For the Year Ended December 31,2020
Revenues:
Service revenue		$59,690
Expenses:
Salaries and wages expense	$10,620
Insurance expense	$800
Interest expense	$480
Depreciation expense	$4,700
Supplies expense	$5,080
Rent expense	$3,760
Total Expenses		$25,440
Net income		$34,250

Statement of retained earnings:

WINDSOR, INC.
Statement of Retained Earnings
December 31,2020
Retained earnings, 1/1/2020	$3,000
Add: Net income	$34,250
Retained earnings, 12/31/2020	$37,250

Statement of financial position:

WINDSOR, INC.
Statement of Financial Position
December 31,2020
Assets
Cash		$10,340
Accounts receivable		$22,090
Supplies		$2,820
Prepaid insurance		$2,350
Equipment	$56,400
Accumulated depreciation-equipment	($31,020)	$25,380
Total Assets		$62,980
Liabilities and stockholder's equity
Liabilities:
Accounts payable	$4,700
Interest payable	$150
Notes payable	$5,000
Unearned revenue	$5,260
Salaries and wages payable	$1,220
Total liabilities		$16,330
Stockholder's equity:
Common shares	$9,400
Retained earnings	$37,250
Total stockholder's equity		$46,650
Total liabilities and stockholder's equity		$62,980

Interest rate:

Annual interest rate = [(480/5000) x 100] x 12/3 = 38.4%

Salaries and wages payable on Dec 31,2019:

Cash paid for salaries and wages	$11,750
Less: Salaries and wages expense in 2020	($10,620)
Add: Salaries and wages payable in 2020	$1,220
Salaries and wages payable on Dec 31,2019	$2,350