Bill’s Boards (BB) is an outdoor advertising company founded by William Longfall. William knows very little accounting so he hired a friend to “keep the books.” Unfortunately, William did not review his friend’s work and now it seems his friend has made a mess of the accounting records. William has provided you the following list of unadjusted account balances at BB’s September 30 fiscal year-end. You have reviewed the balances with William and made notes shown in the right column.

Required:

1. Use the notes to determine and record the adjusting journal entries needed on September 30 to (a) fix the premature recording of advertising revenue, (b) update the rent accounts, (c) account for the use of equipment, (d) update deferred revenue, (e) accrue revenue not yet billed, (f ) accrue unpaid wages, (g) correct the supplies accounts, and (h) accrue income taxes for the year.

2. Post the adjusting journal entries from requirement 1 to T-accounts to determine new adjusted balances, and prepare an adjusted trial balance. (If you are completing this exercise using the general ledger tool in Connect, this requirement will be completed automatically for you.) 

3. Using the adjusted account balances from requirement 2, prepare an income statement, statement of retained earnings, and classified balance sheet.

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BILL'S BOARDS Unadjusted Trial Balance At September 30 Notes Account Name Debits Credits $13,000 Cash This balance equals the balance reported by the bank. A customer ordered $1,000 of advertising services to be provided in October. Accounts Receivable 1,000 The accountant recorded this service by debiting Accounts Receivable and crediting Service Revenue. Starting January 1, BB agreed to pay $1,200 cash to rent the land on which its billboards are located, for the January-December period. The accountant adjusted this account on April 30 but has not adjusted it since. Prepaid Rent 800 BB still has supplies costing $200 on hand on September 30. Supplies Equipment 6,000 BB bought scaffolding and billboards in October last year. Accumulated Depreciation $ Because the equipment was bought at the beginning of the fiscal year, no depreciation is carried forward from prior years. Accounts Payable BB purchased and received $2,000 of supplies used for creating advertising displays. The supplier is to be paid in October. 2,000 This balance relates to $1,500 cash paid by a customer in August for advertising from September 1–November 30. Deferred Revenue 1,500 BB's employees are still waiting to be paid for the last half of September. Salaries and Wages Payable Income Tax Payable BB hasn't paid the $250 tax owed from the last fiscal year. 250 BB has issued 2,000 shares for $1,000 cash. Common Stock 1,000 Retained Earnings 3,750 BB started business a few years ago, so this is the total accumulated earnings up to October 1 of last year. 60,700 BB has provided $2,000 of services for which it hasn't yet billed customers or recorded in its accounting records. Service Revenue BB's employees earn $4,000 per month. The employees were paid in full on August 31, and were paid again on September 15. Salaries and Wages 46,000 Expense About $1,500 of the usefulness of the equipment's $6,000 cost has been used up during the current fiscal year. Depreciation Expense Rent Expense 400 BB incurs a small cost to rent the land on which its billboards are located. Rent for the current year has been paid in full. BB's accountant expensed $2,000 of supplies purchased during the year because he assumed the supplies would be completely used by year-end. As noted above, he was wrong. Supplies Expense 2,000 Income Tax Expense BB's tax rate is 20% of income before tax. $69,200 $69,200 Totals