Short Comprehensive Problem Including Both Adjusting and Closing Entries
Silver Lining, Inc., provides investment advisory services. The company adjusts its accounts monthly, but performs closing entries annually on December 31. The firm's unadjusted trial balance dated December 31, 2011, is shown on the following page.
SILVER-LINING, INC. UNADJUSTED TRIAL BALANCE DECEMBER31, 2011 | ||
| Debits | Credits |
Cash | $ 42,835 |
|
Accounts receivable | 2,000 |
|
Office supplies | 205 |
|
Prepaid rent | 1,200 |
|
Unexpired insurance | 270 |
|
Office equipment | 54,000 |
|
Accumulated depreciation office equipment |
| $35,250 |
Accounts payable |
| 1,400 |
Interest payable |
| 360 |
Income taxes payable |
| 1,750 |
Notes payable |
| 9,000 |
Unearned consulting services revenue |
| 3,500 |
Capital stock |
| 30,000 |
Retained earnings |
| 8,000 |
Dividends | 1,000 |
|
Consulting services revenue |
| 60,000 |
Office supplies expense | 605 |
|
Depreciation expense: furniture and fixtures | 8,250 |
|
Rent expense | 3,525 |
|
Insurance expense | 1,010 |
|
Salaries expense | 27,100 |
|
Income taxes expense | 360 |
|
Totals | 6,900 |
|
| $149,260 | $149,260 |
Other Data
1. Accrued but unrecorded and uncollected consulting services revenue totals $1 ,500 at December 31,2011.
2. The company determined that $2,500 of previously unearned consulting services revenue had been earned at December 31, 2011.
3. Office supplies on hand at December 31 total $110.
4. The company purchased all of its equipment when it first began business. At that time, the estimated useful life of the equipment was six years (72 months).
5. The company prepaid its six-month rent agreement on October 1,2011.
6. The company prepaid its 12-month insurance policy on March 1,2011.
7. Accrued but unpaid salaries total $1 ,900 at December 31,2011.
8. On June 1,2011 , the company borrowed $9,000 by signing a nine-month, 8percent note payable. The entire amount, plus interest, is due on March 1,2012.
9. The company's CPA estimates that income taxes expense for the entire year is $7.500. The
unpaid portion of this amount is due early in 2012.
Instructions
a. Prepare the necessary adjusting journal entries on December 31 , 2011. Prepare also an adjustedtrial balance dated December 31, 2011.
b. From the adjusted trial balance prepared in part a, prepare an income statement and statement of retained earnings for the year ended December 31, 2011. Also prepare the company's balance sheet
dated December 31, 2011.
c. Prepare the necessary year-end closing entries.
d. Prepare an after-closing trial balance.
e. Compute the company's average monthly insurance expense for January and February of 2011.
f. Compute the company's average monthly rent expense for January through September of 2011.
g. If the company purchased all of its office equipment when it first incorporated, for how long has it been in business as of December 31, 2011?
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