Record adjustments and prepare income statement. (LO 1, 2, 3, 4)

Selected amounts (at December 31, 2008) from Budget Planning Company's accounting records are shown here. No adjustments have been made.

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a. There are five adjustments that need to be made before the financial statements for the year ended December 31, 2008, can be prepared. Show each in an accounting equation worksheet.
1. The equipment (purchased on January 1, 2008) has a useful life of 12 years with no salvage value (equal amount of depreciation each year).
2. Interest on the notes payable needs to be accrued for the year in the amount of \(\$ 40,000\).
3. Unexpired insurance at December 31,2008 , is \(\$ 40,000\).
4. The rent payment of \(\$ 120,000\) was made on June 1 . The rent payment is for 12 months beginning on the date of payment.
5. Salaries of \(\$ 58,000\) were earned but unpaid at December \(31,2008\).

b. Prepare an income statement for the year ended December 31, 2008, for Budget Planning Company.

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Cash paid to employees for salaries and wages Cash collected from customers for services rendered Long-term notes payable Cash Common stock Equipment Prepaid insurance Inventory Prepaid rent $ 400,000 2,220,000 350,000 250,000 30.000 780,000 140,000 175,000 120,000 330,000 Salaries and wages expense 428,000 Service revenue 3,000,000 Retained earnings