Fernetti Advertising Agency was founded by John Fernetti in January of 2009. Presented on page 134 are both the adjusted and unadjusted trial balances as of December 31, 2010.

Instructions(a) Journalize the annual adjusting entries that were made.(b) Prepare an income statement and a statement of owner's equity for the year ending December 31, 2010, and a balance sheet at December 31.(c) Answer the following questions.(1) If the note has been outstanding 6 months, what is the annual interest rate on that note?(2) If the company paid $12,500 in salaries in 2010, what was the balance in Salaries Payable on December 31,2009?

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FERNETTI ADVERTISING AGENCY Trial Balance December 31, 2010 Unadjusted Dr. $ 11,000 Adjusted Dr. $ 11,000 Cr. Cr. Cash Accounts Receivable 20,000 22,500 Art Supplies Prepaid Insurance Printing Equipment Accumulated Depreciation Accounts Payable Interest Payable 8,600 5.000 2,500 3,350 60,000 60,000 $ 28,000 S 34,000 5,000 5,000 -0- 150 Notes Payable Unearned Advertising Fees Salaries Payable J. Fernetti, Capital J. Fernetti, Drawing Advertising Revenue Salaries Expense Insurance Expense Interest Expense Depreciation Expense Art Supplies Expense Rent Expense 5.000 5,000 7,200 5,600 1.300 -0- 25,500 25,500 12.000 12,000 58,600 62,700 10,000 11.300 850 350 500 6,000 3,600 4,000 4,000 $129.300 $129,300 $139,250 $139,250