Preparation of adjusting entries. Exhibit 3.18 presents an unadjusted, preclosing trial balance for Reliable Appliance Company on July 31, Year 3. The company closes its books monthly. Additional data include the following:

(1) The company calculates depreciation on equipment at 20 percent of cost per year (assume zero salvage value).

(2) The company calculates depreciation on furniture and fixtures at 25 percent of cost per year (assume zero salvage value).

(3) The leasehold represents long-term rent paid in advance by Reliable Appliance Company. The monthly rental charge is \(\$ 1,800\).

(4) During the month, the company mistakenly recorded one invoice of \(\$ 260\) for the purchase of merchandise on account from the Hinsdale Company as \(\$ 620\). The firm has not yet paid the account.

(5) Commissions unpaid at July 31, Year 3, are \(\$ 1,210\). The firm has paid all salaries. The balance in the Salaries and Commissions Payable account represents the amount of commissions unpaid at July 1.

(6) The company recently delivered merchandise with a sales price of \(\$ 490\) to a customer and charged Accounts Receivable, although the customer had previously paid \(\$ 490\) in advance.
(7) The balance in the Prepaid Insurance account relates to a two-year policy that went into effect on January 1, Year 3.
(8) The company declared a dividend of \(\$ 2,500\) on July 31 , Year 3.
(9) The inventory of merchandise on July 31 , Year 3, was \(\$ 61,200\).
Present adjusting entries at July 31, Year 3. Use only the accounts listed in the trial balance.

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$ 36,514 $ 25,904 EXHIBIT 3.18 Accounts Payable Accounts Receivable RELIABLE APPLIANCE COMPANY Unadjusted, Preclosing Trial Balance July 31, Year 3 (Problem 32) Accumulated Depreciation Advances by Customers Cash Common Stock Equipment Depreciation Expense Dividends Payable Furniture and Fixtures Income Tax Expense 16,428 1,080 18,000 80,000 5,280 | | || 24,000 Income Tax Payable 7,000 Insurance Expense Leasehold 21,600 Merchandise Cost of Goods Sold Merchandise Inventory 99,000 Miscellaneous Expense 376 Prepaid Insurance 900 Rent Expense Retained Earnings 28,588 Salaries and Commissions Expense 4,040 Salaries and Commissions Payable Sales 1,000 50,000 Supplies Inventory 290 $210,000 $210,000