234 LO5-1, LO5-2, L05-7 PROBLEM 5.4A Interim Financial Statements Chapter 5 The Accounting Cycle: Reporting Financial Results Guardian Insurance Agency adjusts its accounts monthly but closes them only at the end of the calendar year. The following are the adjusted balances of the revenue and expense accounts September 30 of the current year and at the ends of two earlier months. Commissions earned Advertising expense. Salaries expense. Rent expense.. Depreciation expense Sept. 30 Aug. 31 June 30 $144,000 $128,000 $90.000 28,000 23,000 15,000 36,000 32,000 24,000 22,500 20,000 15,000 2,700 2,400 1,800 Instructions a. Prepare a three-column income statement, showing net income for three separate time peri ods, all of which end on September 30. Use the format illustrated as follows. Show supporting computations for the amounts of revenue reported in the first two columns. GUARDIAN INSURANCE AGENCY INCOME STATEMENT FOR THE FOLLOWING TIME PERIODS Revenue: Commissions earned Expenses: Month Ended Quarter Ended 9 Months Sept. 30 Sept. 30 Ended Sept. 30 b. Briefly explain how you determined the dollar amounts for each of the three time periods Would you apply the same process to the balances in Guardian's balance sheet accounts? Explain. C. Assume that Guardian adjusts and closes its accounts at the end of each month. Briefly explain how you then would determine the revenue and expenses that would appear in each of the three columns of the income statement prepared in part a.