Record adjustments and prepare financial statements. (LO 1, 2, 3, 4, 5)

The following is a list of accounts and their balances for Casa Bella Interiors at May 31 before adjustments and some additional data for the fiscal year ended May 31, 2006.

Additional data:
1. Depreciation on the office equipment for the year is \(\$ 500\).
2. Salaries owed to employees at year-end but not yet recorded or paid total \(\$ 750\).
3. Prepaid rent that has expired at year-end amounts to \(\$ 800\).
4. Interest due at year-end on the notes receivable is \(\$ 120\).
5. Interest owed at year-end on the notes payable is \(\$ 840\).
6. Unearned service revenue that has actually been earned by year-end totals \(\$ 1,500\).
\section*{Required}

a. Make the adjustments needed at year-end. (Use the accounting equation.)

b. Prepare an income statement for the year ended May 31, 2006, and a balance sheet at May 31, 2006.

Transcribed Image Text:

Casa Bella Interiors Accounts and balances 31-May-06 Cash $ 4,300 Accounts receivable 9,300 Notes receivable 1,000 Interest receivable Prepaid rent 1,700 Supplies 400 Office equipment 23,400 Accumulated depreciation (office equipment) (1,600) Accounts payable 500 Salaries payable Interest payable Unearned service revenue 2,600 Long-term notes payable 8,400 Common stock 5,000 Additional paid-in capital 2,300