P3-2 (Adjusting Entries and Financial Statements) Mason Advertising Agency was founded in January 2010. Presented below are adjusted and unadjusted trial balances as of December 31, 2014.

MASON ADVERTISING AGENCY

Trial Balance

December 31, 2014

Unadjusted

Adjusted

Debit

Credit

Debit

Credit

Cash

$11,000

$11,000

Accounts Receivable

20,000

23,500

Supplies

8,400

3,000

Prepaid Insurance

3,350

2,500

Equipment

60,000

60,000

Accumulated Depreciation - Equipment

$28,000

$33,000

Accounts Payable

5,000

5,000

Interest Payable

0

150

Notes Payable

5,000

5,000

Unearned Service Revenue

7,000

5,600

Salaries and Wages Payable

0

1,300

Common Stock

10,000

10,000

Retained Earnings

3,500

3,500

Service Revenue

58,600

63,500

Salaries and Wages Expense

10,000

11,300

Insurance Expense

850

Interest Expense

350

500

Depreciation Expense

5,000

Supplies Expense

5,400

Rent Expense

4,000

4,000

Totals:

$117,100

$117,100

$127,050

$127,050

Instructions:

(a) Journalize the annual adjusting entries that were made. (Omit explanations.)

Dec 31

Accounts receivable

23,650

Accounts receivable

23,650

Dec 31

Account Title

Amount

Account Title

Amount

Dec 31

Account Title

Amount

Account Title

Amount

Dec 31

Account Title

Amount

Account Title

Amount

Dec 31

Account Title

Amount

Account Title

Amount

Dec 31

Account Title

Amount

Account Title

Amount

Dec 31

Account Title

Amount

Account Title

Amount

(b) Prepare an income statement and a statement of retained earnings for the year ending December 31, 2014 and an unclassified balance sheet at December 31.

MASON ADVERTISING AGENCY

Income Statement

For the Year Ended December 31, 2014

Revenues

Account Title

Amount

Expenses

Account Title

Amount

Account Title

Amount

Account Title

Amount

Account Title

Amount

Account Title

Amount

Account Title

Amount

Total expenses

Formula

Net income

Formula

MASON ADVERTISING AGENCY

Statement of Retained Earnings

For the Year Ended December 31, 2014

Retained Earnings, Jan 1

Amount

Add:

Title

Amount

Retained Earnings, Dec 31

Formula

MASON ADVERTISING AGENCY

Balance Sheet

December 31, 2014

Assets

Account Title

Amount

Account Title

Amount

Account Title

Amount

Account Title

Amount

Account Title

Amount

Account Title

Amount

Formula

Total Assets

Formula

Liabilities and Stockholders' Equity

Liabilities

Account Title

Amount

Account Title

Amount

Account Title

Amount

Account Title

Amount

Account Title

Amount

Total Liabilities

Formula

Stockholders' Equity

Account Title

Amount

Account Title

Amount

Formula

Total liabilities and stockholders' equity

Formula

(c) Answer the following questions:

(1) If the note has been outstanding

3

months, what is the annual interest rate on that note?

Enter text answer here.

(2) If the company paid

$12,500

in salaries and wages in 2014, what was the balance in Salaries and

Wages Payable on December 31, 2013

Enter text answer here.