Problem 1 (35%)
FlooriFy Corp. delivers flooring design consulting services. The company performs adjusting entries on a monthly basis, whereas closing entries are prepared annually at December 31. An unadjusted trial balance dated December 31, current year, follows.
Floorify
Undjusted trial balance December 31st 2020
Cash 2.500
Accounts Receivable 5.500
Prepaid rent 2.500
Unexpired insurance policies 2.000
Office supplies 650
Office Equipment 160.000
Building 295.000
Acc depreciation Building 40.625
Acc Depreciation Office Equipment 20.313
Ac. Payable 1.000
Notes Payable due 3/1 year 2 130.000
Income tax payable 1.000
Unearned fees 1.200
Salaries payable 7.000
Interest payable 5.500
Capital stock 35.000
Retained Earnings 106.225
Dividends 15.000
Sales 950.000
Telephone expense 10.000
Office supply expense 22.000
Depreciation expense office equipment 17.188
Depreciation expense building 34.375
Rent expense 12.000
Insurance expense 11.000
Salary expense 700.000
Income tax expense 1.000
interest expense 7.150
Totals 1.297.863 1.297.863. By the end of December 2020, Marc Douros, chief accountant of FlooriFy Corp is working to finish his accounting for the month. He realizes that he still needs to prepare the adjusting entries, and he has the following information:
1. Salaries earned by employees that have not yet been recorded or paid amount to 90,000.
2. Depreciation of the Office Equipment equipment is based on an estimated life of 9 years. The straight-line method is used. Depreciation of the Building is based on an estimated life of 35 years. The straight-line method is used.
3. The company signed an insurance contract by February 1st 2020 for one year, with a value of 12,000.
4. A 11-month note payable in the amount of 130,000 had been obtained with an interest computed at an annual rate of 6 percent on March 1st 2020. The entire 130,000, plus all of the interest accrued over the 14-month life of the loan, is due in full on February 1st of the upcoming year.
5.- Unrecorded Income Taxes Expense accrued in December amounts to 25% of Earnings before taxes (17195). This amount will not be paid until March 30.
6.- The company has just signed a new 20,000 contract for next year services with customer RPT corp, and collected a 20% of the amount.
7.- By December 31st the company has just sold the building for 280,000 cash.
Prepare adjusting entries on General Journal format.
Problem 2
Prepare an after-adjusting entries trial balance.
Prepare an income statement for the year ended December 31, current year.
Prepare an after closing Balance Sheet.
Briefly evaluate the companys profitability and liquidity.
Cash Prepard costume Land Building Acumulated Fixtures Accumunta 37 Notes payable Accounts payable Uhartea ncome nxes Capital stock Retained earnings Dividends Admissions revenue Concessions revenue Salaries expense Costume Tental Utilities expense Depreciation Deprecration 8 200 1 800 80 000 150 000 18 500 18 000 4 500 100 000 5 700 1 500 4 700 9 000 26 400 9 000 180 200 19 600 57 400 2 700 7100 4 000 2 4001 8 500 21 000 370 1001 370 100| Interest expense com taxes Date Dec 31st 600 Dec 31st 500 Dec 31st Adjunsting Entries Off Campus Playhouse September 30th 2021 Account D Costume rental expense 600 Prepaid costume rental Depreciation expense 500 Accumulated depreciation: building Depreciation expense 300 Accumulated depreciation: fixtures Interest expense 1062 Interest payable Admissions revenue 500 Unearned admissions revenue (nursi Accounts Receivable 4600 Concessions revenue Salary expense 2200 Salary Payable Income taxes expense 3600 Income taxes payable 300 Dec 31st 1062 Dec 31st 500 Dec 31st 4600 Dec 31st 2200 Dec 31st 3600 Dec 31st Cash Accounts receivable Office supplies Prepaid rent Unexpired insurance Office equipment Accumulated Accounts payable Interest payable mcome taxes 40 585 2000 205 1 200 270 54 000 35 250 1 400 360 1 750 9 000 3 500 30 000 8 000 1 000 60 000 Note payable Uncained retainer Capital stock Retained carnings Dividends Client fees carned Ume supple's Depreciation Rent expense Insurance expense Salaries expense Interest expense THCOTTU TXUS 605 8 250 5 775 1 010 27 100 360 6 900 149 260 Totals 149 260 Cash Account cevable 2000 1500 Oflice walls 205 Prepaid 1200 Unwrance 278 SESO 300 Office equipment 54000 06 40 SS 3500 ort 006 180 54000 Interestatie Accumulate Gern Accounts payable 35250 1400 750 di Payable 360 60 Income table Notepayable 1750 9000 600 und eine Catalok Red caring 2500 3500 10000 8000 16000 1400 420 OSEE 9000 1000 10000 1000 1900 Didende 1000 Cliente Inc Incompete Office wollen Depreciation expense of Rentgen 8210 9775 750 100 TOO 60.000 1500 2500 Interesse 360 Sapo 27100 1900 500 16 0059 009 90 1000 00019 700 9000 075 1100 29000 420 2900 Date Dec 31st 1500 1500 Dec 31st 2500 2500 Dec 31st 95 95 Dec 31st 750 Adjunsting Entries Stillmore Investigation December 31st 2021 Account D Acc Receivable Client fees earned Unearned retainer fee: Client fees earned Supplies expense Supplies Depreciation expense Acc. Depreciation equip Rent expense Prepaid rent Insurance expense Unexpired insurance Salaries expense Salaries Payable Interest expense Interest payable Income taxes expense Income taxes payable 750 Dec 31st 300 300 Dec 31st 90 90 Dec 31st 1900 1900 Dec 31st 60 60 Dec 31st 600 600 Trial Balance Stillmore Investigation December 31st 2021 Account D Cash Accounts receivable Office supplies Prepaid rent Unexpired insurance Office equipment Accumulated depreciation: office equipment Accounts payable Interest payable Income taxes payable Note payable Unearned retainer fees Capital stock Retained earnings Salaries Payable Dividends Client fees earned Office supplies expense Depreciation expense: office equipment Rent expense Insurance expense Salaries expense Interest expense Income taxes expense Total C 40 585 3 500 110 900 1801 54 000 36 000 1400 420 2 350 9 000 1000 30 000 8 000 1 900 1 000 64 000 700 9 000 6075 1 100 29 000 420 7500 154 070154 070 64 000 Income Statement Stillmore Investigation December 31st 2021 Client fees earned Expenses Office supplies expense 700 Depreciation expense: 9000 Rent expense 6 075 Insurance expense 1 100 Salaries expense 29 000 Interest expense 420 Income taxes expense 7 500 Total expenses Net income 53 795 10 205 Balance Sheet Stillmore Investigation December 31st 2021 Assets Cash Accounts receivable Office supplies Prepaid rent Unexpired insurance Dividends Current Assets Office equipment Accumulated deprecia Net book value Total Assets Liabilities & Shareholder's value Accounts payable Interest payable Income taxes payable Note payable Unearned retainer fees Salaries Payable Current Liabilities 40585 3500 110 900 180 1 000 46275 54000 -36 000 18 000 64 275 1400 420 2350 9000 1000 1900 16070 ROS ROE REA 15,95% 21,17% 15,88% Capital stock Retained earnings Net Income Total Shareholder's Eq Total Liabilities & SHE 30000 8000 10 205 48 205 64275 Current ra 2,879589 WC 30205 Average rent from Jan to sept 900 3 months total rent for the year Rent expense form jan 300 6075 5175 575 Insurance expense jan and Feb 90 during 10 month 900 Total year 1 100 Two months 200 Average 100 Cash Prepard costume Land Building Acumulated Fixtures Accumunta 37 Notes payable Accounts payable Uhartea ncome nxes Capital stock Retained earnings Dividends Admissions revenue Concessions revenue Salaries expense Costume Tental Utilities expense Depreciation Deprecration 8 200 1 800 80 000 150 000 18 500 18 000 4 500 100 000 5 700 1 500 4 700 9 000 26 400 9 000 180 200 19 600 57 400 2 700 7100 4 000 2 4001 8 500 21 000 370 1001 370 100| Interest expense com taxes Date Dec 31st 600 Dec 31st 500 Dec 31st Adjunsting Entries Off Campus Playhouse September 30th 2021 Account D Costume rental expense 600 Prepaid costume rental Depreciation expense 500 Accumulated depreciation: building Depreciation expense 300 Accumulated depreciation: fixtures Interest expense 1062 Interest payable Admissions revenue 500 Unearned admissions revenue (nursi Accounts Receivable 4600 Concessions revenue Salary expense 2200 Salary Payable Income taxes expense 3600 Income taxes payable 300 Dec 31st 1062 Dec 31st 500 Dec 31st 4600 Dec 31st 2200 Dec 31st 3600 Dec 31st Cash Accounts receivable Office supplies Prepaid rent Unexpired insurance Office equipment Accumulated Accounts payable Interest payable mcome taxes 40 585 2000 205 1 200 270 54 000 35 250 1 400 360 1 750 9 000 3 500 30 000 8 000 1 000 60 000 Note payable Uncained retainer Capital stock Retained carnings Dividends Client fees carned Ume supple's Depreciation Rent expense Insurance expense Salaries expense Interest expense THCOTTU TXUS 605 8 250 5 775 1 010 27 100 360 6 900 149 260 Totals 149 260 Cash Account cevable 2000 1500 Oflice walls 205 Prepaid 1200 Unwrance 278 SESO 300 Office equipment 54000 06 40 SS 3500 ort 006 180 54000 Interestatie Accumulate Gern Accounts payable 35250 1400 750 di Payable 360 60 Income table Notepayable 1750 9000 600 und eine Catalok Red caring 2500 3500 10000 8000 16000 1400 420 OSEE 9000 1000 10000 1000 1900 Didende 1000 Cliente Inc Incompete Office wollen Depreciation expense of Rentgen 8210 9775 750 100 TOO 60.000 1500 2500 Interesse 360 Sapo 27100 1900 500 16 0059 009 90 1000 00019 700 9000 075 1100 29000 420 2900 Date Dec 31st 1500 1500 Dec 31st 2500 2500 Dec 31st 95 95 Dec 31st 750 Adjunsting Entries Stillmore Investigation December 31st 2021 Account D Acc Receivable Client fees earned Unearned retainer fee: Client fees earned Supplies expense Supplies Depreciation expense Acc. Depreciation equip Rent expense Prepaid rent Insurance expense Unexpired insurance Salaries expense Salaries Payable Interest expense Interest payable Income taxes expense Income taxes payable 750 Dec 31st 300 300 Dec 31st 90 90 Dec 31st 1900 1900 Dec 31st 60 60 Dec 31st 600 600 Trial Balance Stillmore Investigation December 31st 2021 Account D Cash Accounts receivable Office supplies Prepaid rent Unexpired insurance Office equipment Accumulated depreciation: office equipment Accounts payable Interest payable Income taxes payable Note payable Unearned retainer fees Capital stock Retained earnings Salaries Payable Dividends Client fees earned Office supplies expense Depreciation expense: office equipment Rent expense Insurance expense Salaries expense Interest expense Income taxes expense Total C 40 585 3 500 110 900 1801 54 000 36 000 1400 420 2 350 9 000 1000 30 000 8 000 1 900 1 000 64 000 700 9 000 6075 1 100 29 000 420 7500 154 070154 070 64 000 Income Statement Stillmore Investigation December 31st 2021 Client fees earned Expenses Office supplies expense 700 Depreciation expense: 9000 Rent expense 6 075 Insurance expense 1 100 Salaries expense 29 000 Interest expense 420 Income taxes expense 7 500 Total expenses Net income 53 795 10 205 Balance Sheet Stillmore Investigation December 31st 2021 Assets Cash Accounts receivable Office supplies Prepaid rent Unexpired insurance Dividends Current Assets Office equipment Accumulated deprecia Net book value Total Assets Liabilities & Shareholder's value Accounts payable Interest payable Income taxes payable Note payable Unearned retainer fees Salaries Payable Current Liabilities 40585 3500 110 900 180 1 000 46275 54000 -36 000 18 000 64 275 1400 420 2350 9000 1000 1900 16070 ROS ROE REA 15,95% 21,17% 15,88% Capital stock Retained earnings Net Income Total Shareholder's Eq Total Liabilities & SHE 30000 8000 10 205 48 205 64275 Current ra 2,879589 WC 30205 Average rent from Jan to sept 900 3 months total rent for the year Rent expense form jan 300 6075 5175 575 Insurance expense jan and Feb 90 during 10 month 900 Total year 1 100 Two months 200 Average 100
