31, 0007 Charle Ddiver was pleased with the nesults of 3C Company's operation in year 2005, especially since he only operated on a part-time basis. In fact, he found the catering business to be not oaly profitable but also an enjoyable challenge He decided to continue the 3C Company in year 2006, finish his hospitality and marketing education, and search for a suitable restaurant to acquire and operate Near the end of year 2006, Charlie found an 84-sea restaurant that had been closed for several months. It was the type of facility he had been looking for Afler locating the owner, he reached an agreement to lease the restaurant for five years beginning January 2007, The lease set the first year rental cost at $24,000 and stipulated a 10% yearly rental increase in each of the remaining four years of the five-year lease. In addition, the owner agreed to allow Char lie to trade in the old equipment and furnishings for whatever he can get for them and to purchase new equipment and furnishings. The equipment and fur nishings were traded in on new equipment with a net cost of $171,524 and new furnishings with a net cost of $53,596. The new equipment was estimated to have a 12-year life with a residual value of $6,500. The new fumishings had an estimated 8-year life and a residual valge of $2,620. Charlie realized that for tax purpoes and other considerations, he should Classic Cuisine" Corporation. We will simplify this name to the 4C Company. With the cash he had saved from op- erating the 3C Company and from the sale of the truck, Charlie purchased $50,000 of 4C Company's $2.00 par value common stock. Charlie used his rep- utation and good business record over the past two years to obtain a corporate loan from his bank for $200,000. The loan was to be repaid over the next five incorporate a new company as years in monthly installments of principal and interest Although Charlie hired a bookkeeper, he has asked you, a personal friend to prepare the 4C Company's year-end financial statements and to discuss the results of his first year of operations with him. You agreed to prepare the year- end statements from a year-ending unadjusied trial balance of accounts provided To make the necessary adjustments, you are given the following information Inventory figures in the unadjusted trial ure for the beginning of Year to you. 2007. The December 31, 2007, year-end inventorics are $5,915 for food and $2.211 for beverages. Accrued payroll of $2.215 maist be recognzed as of December 31, 2007, Depreciation on cquipment and furnishings using the straight line method must he recognized " The bunk loan principal to be paid in Year 2008 is 538.21 Using the unadjusted trial and additional information, complete the adjus tnents and prepurc an incsnos statement and bulance sheet in the report forsat or dC Company for the year ended December Sh. 2007. Use an income tax rule of % of sperating incoere lincinne beforc tash, which will not be pud until the 22 Year 2008 The unadjusted trial belance is provided on the following page. 31, 0007 Charle Ddiver was pleased with the nesults of 3C Company's operation in year 2005, especially since he only operated on a part-time basis. In fact, he found the catering business to be not oaly profitable but also an enjoyable challenge He decided to continue the 3C Company in year 2006, finish his hospitality and marketing education, and search for a suitable restaurant to acquire and operate Near the end of year 2006, Charlie found an 84-sea restaurant that had been closed for several months. It was the type of facility he had been looking for Afler locating the owner, he reached an agreement to lease the restaurant for five years beginning January 2007, The lease set the first year rental cost at $24,000 and stipulated a 10% yearly rental increase in each of the remaining four years of the five-year lease. In addition, the owner agreed to allow Char lie to trade in the old equipment and furnishings for whatever he can get for them and to purchase new equipment and furnishings. The equipment and fur nishings were traded in on new equipment with a net cost of $171,524 and new furnishings with a net cost of $53,596. The new equipment was estimated to have a 12-year life with a residual value of $6,500. The new fumishings had an estimated 8-year life and a residual valge of $2,620. Charlie realized that for tax purpoes and other considerations, he should Classic Cuisine" Corporation. We will simplify this name to the 4C Company. With the cash he had saved from op- erating the 3C Company and from the sale of the truck, Charlie purchased $50,000 of 4C Company's $2.00 par value common stock. Charlie used his rep- utation and good business record over the past two years to obtain a corporate loan from his bank for $200,000. The loan was to be repaid over the next five incorporate a new company as years in monthly installments of principal and interest Although Charlie hired a bookkeeper, he has asked you, a personal friend to prepare the 4C Company's year-end financial statements and to discuss the results of his first year of operations with him. You agreed to prepare the year- end statements from a year-ending unadjusied trial balance of accounts provided To make the necessary adjustments, you are given the following information Inventory figures in the unadjusted trial ure for the beginning of Year to you. 2007. The December 31, 2007, year-end inventorics are $5,915 for food and $2.211 for beverages. Accrued payroll of $2.215 maist be recognzed as of December 31, 2007, Depreciation on cquipment and furnishings using the straight line method must he recognized " The bunk loan principal to be paid in Year 2008 is 538.21 Using the unadjusted trial and additional information, complete the adjus tnents and prepurc an incsnos statement and bulance sheet in the report forsat or dC Company for the year ended December Sh. 2007. Use an income tax rule of % of sperating incoere lincinne beforc tash, which will not be pud until the 22 Year 2008 The unadjusted trial belance is provided on the following page