Ancrea and Max Caspean established a corporation called Caspean Hair Studio. The company main objective is to provide a high-end hair treatments to exclusive clients in downtown Los Angeles, CA. The company performs adjusting entries monthly, at the end of the month, Whereas, closing entries were recorded annually, on December 31st. The company maintained and posted all the transactions to its appropriate ledger accounts. The balances of each accunts are posted on #1. worksheet tab under unadjusted trial balance column (B and C). . a. b. c. d. e. ADJUSTING ENTRIES DATA: Accrued but unrecorded and uncollected service fees earned total $25,000 at December 31st, current year. The company determined that $15,000 of previously unearned services fees had been earned at December 31st, current year. Office supplies on hand at December 31 total $300. The company purchased all of its service equipment when it first began business. At that time, the estimated useful life of the equipment was six years (72 months). The company depreciated its service equipment monthly based on six years or 72 months useful life. The company prepaid its nine-month rent agreement on June 1st, current year. The company prepaid its six-month insurance policy on December 1st, current year. Accrued but unpaid salaries total $12,000 at December 31st, current year. On September 1st, current year, the company borrowed $60,000 by signing an 8-month, 4 percent (annual) note payable. The company accrued its interest payable monthly. The entire amount, plus interest, is due on March 1, 2018, next year. The company's accounting firm estimates that income taxes expense for the entire year is $50,000. The unpaid portion of this amount is due early in the next year. f. h. i. Required: #1 Prepare the necessary adjusting journal entries on December 31, current year. List all necessary jounal entries on the table provided on Adjusting Entries tab. #2 Post the December adjusting entries to the appropriate column on #2. worksheet tab (column D to G) Complete the 10-column worksheet on #2. worksheet tab for the year ended December 31. #3 Prepare income statement for the year ended December 31 in report form provided on #3 income statement tab. #4 Prepare retained earning for the year ended December 31 in report form provided on #4 retained earning tab. #5 Prepare balance sheet as of December 31 in report form provided on #5 balance sheet tab. #6 Prepare the necessary year-end closing entries. The table provided on #6 closing entries tab. #7 Prepare an after-closing trial balance on #7 tab. CASPEAN HAIR STUDIO - Adjusting Entries. CASPEAN HAIR STUDIO General Journal December 31, Current Year (a) Dec. 31 To record revenue accrued at the end of Dec. (b) 31 To convert unearned revenue to earned revenue in Dec. (c) 31 To record offices supplies used in December. (d) 31 To record depreciation expense in December. (e) 31 To record December rent expense. (f) 31 To record portion of insurance policies expired in December. (g) 31 To record accrued but unpaid salaries in Dec. (b) 31 To record interest expense accrued in December. (0) To record income taxes expense accrued in Dec. 1 CASPEAN HAIR STUDIO CASPEAN HAIR STUDIO Income Statement For the Year Ended December 31, Year 1 Revenues: Expenses: 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 $ Total Expenses Income before taxes Income taxes expense Net Income #VALUE! 25 26 27 28 29 30 CASPEAN HAIR STUDIO CASPEAN HAIR STUDIO Statement of Retained Earnings For the Year Ended December 31, Current Year Retained earnings (1/1/Current Year) Add: Less: Retained earnings (12/31/Current Year) 1 2 3 7 #VALUE! 3 7 CASPEAN HAIR STUDIO CASPEAN HAIR STUDIO. Balance Sheet December 31, Current Year Assets 1 2 3 7 Total assets $ Liabilities 3 2 1 2 3 4 Total liabilities 7 3 Stockholders' Equity 1 Total stockholders' equity $ Total liabilities and stockholders' equity $ 5 CASPEAN HAIR STUDIO - Closing Entries 2 3 4 CASPEAN HAIR STUDIO General Journal December 31, Current Year (1) 6 7 8 9 Dec. 31 To close Service Fees Earned. (2) 31 To close all expense accounts. 1. 2 23 24 25 26 (3) 31 To transfer net income earned in Current Yr. to Retained Earnings account (4) 31 28 29 30 1. 2 33 34 35 36 7 38 To close dividends declared in Current Yr. to Earnings. CASPEAN HAIR STUDIO CASPEAN HAIR STUDIO After-Closing Trial Balance December 31, Current Year Total $ $ Ancrea and Max Caspean established a corporation called Caspean Hair Studio. The company main objective is to provide a high-end hair treatments to exclusive clients in downtown Los Angeles, CA. The company performs adjusting entries monthly, at the end of the month, Whereas, closing entries were recorded annually, on December 31st. The company maintained and posted all the transactions to its appropriate ledger accounts. The balances of each accunts are posted on #1. worksheet tab under unadjusted trial balance column (B and C). . a. b. c. d. e. ADJUSTING ENTRIES DATA: Accrued but unrecorded and uncollected service fees earned total $25,000 at December 31st, current year. The company determined that $15,000 of previously unearned services fees had been earned at December 31st, current year. Office supplies on hand at December 31 total $300. The company purchased all of its service equipment when it first began business. At that time, the estimated useful life of the equipment was six years (72 months). The company depreciated its service equipment monthly based on six years or 72 months useful life. The company prepaid its nine-month rent agreement on June 1st, current year. The company prepaid its six-month insurance policy on December 1st, current year. Accrued but unpaid salaries total $12,000 at December 31st, current year. On September 1st, current year, the company borrowed $60,000 by signing an 8-month, 4 percent (annual) note payable. The company accrued its interest payable monthly. The entire amount, plus interest, is due on March 1, 2018, next year. The company's accounting firm estimates that income taxes expense for the entire year is $50,000. The unpaid portion of this amount is due early in the next year. f. h. i. Required: #1 Prepare the necessary adjusting journal entries on December 31, current year. List all necessary jounal entries on the table provided on Adjusting Entries tab. #2 Post the December adjusting entries to the appropriate column on #2. worksheet tab (column D to G) Complete the 10-column worksheet on #2. worksheet tab for the year ended December 31. #3 Prepare income statement for the year ended December 31 in report form provided on #3 income statement tab. #4 Prepare retained earning for the year ended December 31 in report form provided on #4 retained earning tab. #5 Prepare balance sheet as of December 31 in report form provided on #5 balance sheet tab. #6 Prepare the necessary year-end closing entries. The table provided on #6 closing entries tab. #7 Prepare an after-closing trial balance on #7 tab. CASPEAN HAIR STUDIO - Adjusting Entries. CASPEAN HAIR STUDIO General Journal December 31, Current Year (a) Dec. 31 To record revenue accrued at the end of Dec. (b) 31 To convert unearned revenue to earned revenue in Dec. (c) 31 To record offices supplies used in December. (d) 31 To record depreciation expense in December. (e) 31 To record December rent expense. (f) 31 To record portion of insurance policies expired in December. (g) 31 To record accrued but unpaid salaries in Dec. (b) 31 To record interest expense accrued in December. (0) To record income taxes expense accrued in Dec. 1 CASPEAN HAIR STUDIO CASPEAN HAIR STUDIO Income Statement For the Year Ended December 31, Year 1 Revenues: Expenses: 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 $ Total Expenses Income before taxes Income taxes expense Net Income #VALUE! 25 26 27 28 29 30 CASPEAN HAIR STUDIO CASPEAN HAIR STUDIO Statement of Retained Earnings For the Year Ended December 31, Current Year Retained earnings (1/1/Current Year) Add: Less: Retained earnings (12/31/Current Year) 1 2 3 7 #VALUE! 3 7 CASPEAN HAIR STUDIO CASPEAN HAIR STUDIO. Balance Sheet December 31, Current Year Assets 1 2 3 7 Total assets $ Liabilities 3 2 1 2 3 4 Total liabilities 7 3 Stockholders' Equity 1 Total stockholders' equity $ Total liabilities and stockholders' equity $ 5 CASPEAN HAIR STUDIO - Closing Entries 2 3 4 CASPEAN HAIR STUDIO General Journal December 31, Current Year (1) 6 7 8 9 Dec. 31 To close Service Fees Earned. (2) 31 To close all expense accounts. 1. 2 23 24 25 26 (3) 31 To transfer net income earned in Current Yr. to Retained Earnings account (4) 31 28 29 30 1. 2 33 34 35 36 7 38 To close dividends declared in Current Yr. to Earnings. CASPEAN HAIR STUDIO CASPEAN HAIR STUDIO After-Closing Trial Balance December 31, Current Year Total $ $