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Case Study Chapter 3 John Smith has been the owner and operator of American Advertising Company since its beginning 10 years ago. The company
Case Study Chapter 3 John Smith has been the owner and operator of American Advertising Company since its beginning 10 years ago. The company has prospered. Recently, Nicholas mentioned that he would sell the business for the right price. Assume that you are interested in buying American Advertising. You obtain the most recent monthly trial balance, which follows. Revenues and expenses vary little from month to month, and January is a typical month. The trial balance shown is a preliminary, or unadjusted, trial balance. The controller informs you that the necessary adjustments should be made which are revenues of $3,800 and supply expenses of $1,100. Also, if you were to buy American Advertising, you would hire a manager so you could devote your time to other duties. Assume that this person would require a monthly salary of $5,000. American Advertising Company Trial Balance January 31, 20XX Account Title Cash Accounts Receivable Prepaid Expenses Building Accumulated Depreciation-Building Accounts Payable Salaries Payable Unearned Revenue Common Stock Retained Earnings Dividends Service Revenue Rent Expense Salaries Expense Utilities Expense Depreciation Expense Supplies Expense Total Balance Debit Credit $ 9,700 14,100 2,600 221,300 $ 68,600 13,000 56,700 30,400 80,000 9,000 12,300 3,400 900 $ 261,000 $ 261,000
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