26 > Financial Accounting-Acctg. (7)SupEx(AJES).docx: Instructor-Turck NAME use your own paper Part A -- See instructions on the next page. HALES DELIVERY COMPANY Unaudited Income Statement (prepared from an Unadjusted Trial Balance) For Year Ended December 31, 2019 Revenue: Delivery Revenue. ... $68,700 (hint: read a &b narratives) Expenses: (hint: 1 expense account needed) Salaries expense $23,000 Insurance expense 3,000 (hint: read f narrative) Rent expense 3,100 Supplies expense. 4,600 (hint: read e narrative Advertising expense 2,500 Depreciation expense (hint: read c narrative). 2,200 Utilities expense.... 300 Total expenses......... 38,700 Net Income (loss) $ 30.000 .***.. HALES DELIVERY COMPANY Unaudited Statement of Changes in Owner's Equity (prepared from an Unadjusted Trial Balance) For Year Ended December 31, 2019 Common Retained Total Stock Earnings 0. E. Beginning Owners' Equity $ 19,000 $ 27,500 $ 46,500 New Owner Contributions. -0- n/a -0- Net Income (loss). n/a 30,000 30,000 Dividends n/a (15,000 (15,000) Ending Owners' Equity $ 19.000 $ 42.500 $ 61.500 HALES DELIVERY COMPANY Unaudited Balance Sheet(prepared from an Unadjusted Trial Balance) (classified format) as of December 31, 2019 Assets CURRENT ASSETS: (hint: 2 new current asset accounts needed) Cash.... $ 3,900 Accounts receivable .2,700 4,200 Prepaid rent .............. Total Current Assets 10,800 PROPERTY, PLANT & EQUIPMENT: Land, at cost ..36,000 Buildings and Equipment, at cost 113,400 Less: Accumulated Depreciation, B & E (30,900) (read c narrative) Buildings and Equipment, net book value 82.500 Property, Plant & Equipment.. 118,500 Total assets ......... $129,300 Liabilities CURRENT LIABILITIES: (hint: 2 new liability accounts needed) Accounts payable.... ... $ 12,400 Salaries Payable. .................. 5,400 Short-term Loan Payable(due 5/1/2020) 50,000 Total Current Liabilities $ 67,800 NON-CURRENT LIABILITIES NONE Total Liabilities 67,800 Owners' Equity Common Stock. .19,000 Retained Earnings. 42.500 Total Owners' Equity.. 61,500 Total liabilities and owners' equity $129,300 1 AMJASON D 20 F M A M J J A S O NI a. *23 Financial Accounting-Acctg_-- (7)SupEx(AJEs).docx: Instructor-Turck NAME use your own paper Part A (continued) Hales Corp. has trouble applying the Revenue Recognition and Matching principles to its accounting records and thus its $30,000 Unaudited Net Income contains material errors. You are a member of the outside audit staff. During the course of your examination of the financial statements and accounting records of the Hales Corporation for the year ended December 31, 2019, you discover the following: Instructions: 1. For each item below draft an AJE (in general journal form) to fix the misstatement of account balances. A review of drivers' completed work orders (i.e., records of deliveries made) for December (2019) shows that for the last week of the year drivers made deliveries valued at $4,500. These end of the year work orders did not get invoiced to customers until January of 2020. The accrual for these completed but unbilled work orders has not been journalized for 2019. b. During 2019, the company received a $1,000 cash advance from a customer for services to be performed in 2020. The $1,000 was credited to Delivery Revenue. No AJE was made. c. Hales' bookkeeper is supposed to adjust for depreciation each month. The bookkeeper has forgotten to record depreciation for December. Note: for all of 2019, Hales acquired no new buildings and equipment and Hales did not dispose of any buildings and equipment. d. Hales borrowed $50,000 from a local bank on May 1, 2019. Principal and interest at 12% annual rate will be paid on May 1, 2020. No prior accruals for interest have been made. e. Notice there are $-0-Supplies listed in the asset section of the Balance Sheet. However, you discover that Supplies costing $750 were in the storeroom at December 31, 2019. f. Notice there is $-0- Prepaid Insurance on the Balance Sheet. However, an insurance policy covering three years was purchased on January 1, 2019, for $3,000. The entire amount was debited to Insurance Expense and no adjusting journal entry has ever been recorded for this policy. 2. Determine the proper Net Income for the year after making adjustments from part 1. Unaudited Net Income (see Income Statement on previous page) $ 30,000 a. b. c. d e. Proper Net Income after making adjustments (CkFig) S 32,050 3. Assume the above adjustments have been journalized and posted to the general ledger. Prepare proper Statement of Owner Equity and Balance Sheet for Hales. (CkFig: Total Assets = $136,350) 2 IAMJAI SION D* FM A M J J A S O NI