Good Afternoon. The following questions have already been completed, I was hoping for a second pair of eyes to review my answers. If wrong you do not have to provide the answer, but explaining which portion is wrong would be helpful to so I can rework for the accurate solution. Thank you so much.

Darya McNeil owns and operates Darya's Day Spa.She has decided to sell the business and retire.She has had discussions with a representative from a regional chain of day spas.The discussions are at the complex stage of agreeing on a price.Among the important factors have been the financial statements of the business.Each year they develop a statement of profits on a cash basis; no balance sheet was prepared.Darya provided the other company with the following statement for 2015:

Darya's Day Spa

Income Statement for 2015

Spa Fees Collected

$1,215,000

Expenses paid:

Rent for Office Space

$130,000

Utility Expense

43,600

Telephone Expense

12,200

Salaries Expense

562,000

Supplies Expense

31,900

Miscellaneous Expenses

12,400

Total Expenses

792,100

Profit for 2015

$422,900

You have been asked to examine the financial figures for 2015.The other company's representative said, "I question the figures because, among other things, they appear to be on a 100 percent cash basis."Your investigations revealed the following additional data at December 31, 2015.

a.Of the $1,215,000 in spa fees collected in 2015, $142,000 was for services performed prior to 2015.

b.At the end of 2015, spa fees of $29,000 for services performed during the year were uncollected.

c.Office equipment owned and used by Darya cost $205,000.Depreciation was estimated at $20,500 annually.

d.A count of suppliers at December 31, 2015, reflected $5,200 worth of items purchased during the year that were still on hand.Also, the records for 2014 indicated that the suppliers on hand at the end of 2014 were $3,125.

e.At the end of 2015, the secretary whose salary is $48,000 per year had not been paid for December because of a long trip that extended to January 15, 2016.

f.The December 2015 telephone bill for $1,400 has not been recorded or paid.In addition, the $12,200 amount on the statement of profits includes payment of the December 2014 bill of $1,800 in January 2015.

g.The $130,000 office rent paid was for 13 months (it included the rent for January 2016).

Required

1.Complete journal entries for a - g above.

Journal Entries

Accounts

Debit in dollars

Credit in dollars

a.

Spa Fees

142,000

Dayra Capital Account

142,000

(Income of prior years not recorded for earlier capital adjustments)

b.

Accounts receivable

29,000

Spa Fees

29,000

(Accrued Fees)

c.

Depreciation Expense - Equipment

20,500

Accumulated Depreciation - Equipment

20,500

(Depreciation Charged)

d.

Office Supplies

5,200

Office Supplies Expense

5,200

(Supplies on Hand Adjusted)

Supplies Expense Account

3,125

Accounts Payable

3,125

(Amount due on Supplies Recorded)

e.

Salaries Expense Account

4,000

Salaries Payable

4,000

(Salaries Expense)

f.

Telephone Expense Account

1,400

Telephone Expense Payable

1,400

(Phone Expense Due)

Darya Capital Account

1,800

Telephone Expense

1,800

(expense of previous year that was not recorded and now adjusted in capital)

g.

Prepaid Rent

10,000

Rent Expense

10,000

(Adjusted Prepaid Rent)

2. Please review this prepared corrected income statement for 2015 (ignore income taxes).

Income Statement

Amount

Spa Fees Earned (1,215,000 - 142,000 + 29,000)

1,102,000

Less Expense

Rent for Office (130,000-10,000)

120,000

Utility Expense

43,600

Telephone Expense (12,200+1,400-1,800)

11,800

Salaries Expense (562,000+4000)

566,000

Supplies Expense (319,000+3,125-5,200)

29,825

Depreciation Expense

20,500

Miscellaneous Expense

12,400

Total Expense

804,125

Net Income

297,875

3. Please review this written memo highlighting important items that should be considered in the pricing decision.

Pricing Memo

Dayra's Day Spa must consider all of the following as it attempts to making a pricing decision.

1.Depreciation Expense

2.Supplies Consumed Expense

3.Supplies Consumed Expense

4.Salaries Payable Expense