Exercise 3-12

Santo Design Agency was founded by Thomas Grant in January 2008. Presented below is the adjusted trial balance as of December 31, 2014.

SANTO DESIGN AGENCY ADJUSTED TRIAL BALANCE DECEMBER 31, 2014
		Debit			Credit
Cash		$11,000
Accounts Receivable		21,500
Supplies		5,000
Prepaid Insurance		2,500
Equipment		60,000
Accumulated Depreciation-Equipment					$35,000
Accounts Payable					5,000
Interest Payable					150
Notes Payable					5,000
Unearned Service Revenue					5,600
Salaries and Wages Payable					1,300
Common Stock					10,000
Retained Earnings					3,500
Service Revenue					61,500
Salaries and Wages Expense		11,300
Insurance Expense		850
Interest Expense		500
Depreciation Expense		7,000
Supplies Expenses		3,400
Rent Expense		4,000
Totals		$127,050			$127,050

1/Prepare an income statement for the year ending December 31, 2014.

SANTO DESIGN AGENCY Income Statement For the Year Ended December 31, 2014

2/Prepare a statement of retained earnings for the year ending December 31, 2014. (List items that increase retained earnings first.)

SANTO DESIGN AGENCY Statement of Retained Earnings For the Year Ended December 31, 2014

3/Prepare an unclassified balance sheet at December 31. (List assets in order of liquidity.)

SANTO DESIGN AGENCY Balance Sheet December 31, 2014

Liabilities and Stockholders' Equity

4/Answer the following questions. (Round interest rate to 0 decimal places, e.g. 7%.) (1) If the note has been outstanding 6 months, what is the annual interest rate on that note? (Hint: Assume interest payable is the outstanding for 6 months.)

The annual interest rate

$

%

(2) If the company paid $17,500 in salaries and wages in 2014, what was the balance in Salaries and Wages Payable on December 31, 2013?

The balance in Salaries and Wages Payable

$