56. Presented below is the December 31 trial balance of Callaway Studios. 30 points

Callaway Studios Trial Balance December 30, 2016
	Debit	Credit
Cash .........................................	$ 14,800
Accounts Receivable ..........................	30,430
Allowances for Doubtful Accounts .............	300
Finished Goods Inventory, January 1 .......... Office Supplies	62,400 3,170
Equipment ......................	300,000
Accumulated Depreciation-Equipment ..........
Prepaid Insurance ............................	7,200
Notes Payable ................................		60,000
Rent Received In Advance Payable..............		8,400
Wages Payable Callaway Common Stock........................ Retained Earnings		72,000 219,260
Sales ........................................		480,000
Purchases...................	320,000
Salaries Expense .......................	40,000
Advertising Expense ..........................	5,360
Administrative Salaries Expense ..............	52,000
Office Expense ...............................	4,000
	$839,660	$839,660

(a) 1.	Adjusting entries Callaway uses a periodic inventory system and needs to close out the Purchases and the FG 1/1 Inventory account and create the Cost of Goods Sold. Prepare the adjusting entry to close out the beginning inventory and establish the ending inventory on December 31 of $64,000. The amount is adjusted to the Purchases and it is shown as a debit to the Cost of Goods Sold. Prepare the additional adjusting entries below.

2. Purchased a three-year insurance policy for $7,200 on September 1, 2016 and recorded the premium payment in the Prepaid Expense asset account.

(b) Borrowed $60,000 on a 1-year, 12% note on July 1, 2016. Interest is

payable at maturity. What is the entry for the accrued interest on Dec. 31^st.

(c) Collected $8,400 on October 1, 2016, to cover six months' rent paid in

advance, and recorded the receipt in a liability account.

(d) The Allowance for Doubtful Accounts shows an unadjusted balance of $300 (debit) as of December 31, 2016. Based on an aging of receivables, it is determined that the balance in the allowance account should be $1,775.

(e) Machinery purchased on January 1, 2016, for $300,000 is to be depreciated under the straight-line method over five years with no residual value.

(f) A sale to customer Joe Smith was not recorded because the invoice was not discovered until Jan. 2^nd for $1,700. The sales invoice was dated Dec. 28th.

(g) Accrued salaries and wages are $2,740 at December 31, 2016.

(h) The office supplies account has a balance of $3,170. An inventory of

supplies revealed a total of $1,550.

(i) The income tax rate is 30% of taxable income of $100,000. Record the adjusting entry for the income tax liability.

57. Prepare the closing entries for Callaway. You can abbreviate the account titles.

Debit	Credit