The case: Pioneer Advertising Agency, Inc. is a sports advertising venture that began business on October 1, 20x1. The board of directors for Pioneer has engaged your firms assistance in accounting for transactions and preparing a Balance Sheet and Income Statement for the month ended October 31, 20x1. Pioneer completed the following transactions during October 20x1:

1. Pioneer was incorporated on October 1, 20x1, and on that date, 5000 shares of no-par common stock was issued for $100,000 cash.
2. On October 1, Pioneer purchased office equipment costing $50,000 by signing a 3-month, $50,000 note payable with a 12% annual interest rate. Both interest and principal are due on January 1, 20x2. The equipment has a useful life of ten years, has a $2,000 estimated salvage value, and is depreciated using the straight line method.
3. Robert Knox (a customer) remitted $12,000 cash to Pioneer on October 2 for advertising services that are expected to be completed by December 31, 20x1. The services are provided evenly during the months of October, November and December.
4. On October 4, Pioneer payed $6,000 cash for a one-year liability insurance policy that expires on September 30, 20x2.
5. On October 5, Pioneer purchased a supply of advertising materials from Aero Supply for $25,000 on account. The materials are used for preparing and printing advertising products for customers. At October 31, an inventory count noted that only $10,000 of materials remained.
6. On October 9, Pioneer signed a contract with a local business for advertising posters to be provided in November. Pioneer will commence work on the posters in November, and payment of $7,000 is due following delivery of the posters to the customer.
7. Pioneers board of directors declared and paid a cash dividend of $5,000 on October 20.
8. Pioneer pays employees salaries in cash. Employees are paid once a month, on the last Friday of each month. The total payroll is $10,000 per each 5-day workweek. In October, the pay period began on Monday, October 1. Consequently, the pay period ended on Friday, October 26, with salaries of $40,000 being paid on October 26. Thus, employees worked three days in October (Monday the 29th, Tuesday the 30th, Wednesday the 31st) for which they were not yet paid as of October 31, 20x1.
9. Pioneer paid Felix Realty $9,000 cash on October 31 for office rent for the month of October.
10. On October 31, Pioneer received $28,000 cash and billed Copa Company $72,000 for advertising services of $100,000 that Pioneer provided during October.
11. Pioneer provided $2,000 of services to a customer on October 31. Pioneer billed the client but the client has not yet paid.
12. Pioneer estimates that 2% of its ending accounts receivable balance will be uncollectible.
13. Pioneer estimates that the company owes income taxes equal to $11,592 for the month of October. October income taxes will not be paid until early in fiscal 20x2 (i.e., the next year).

Prepare an income statement for the month of October

2 3 4 Pioneer Advertising Income Statement Month-Ended October 31, 20x1 5 Revenues 6 7 Cash 100,000 8 9. 10 Total Revenues 11 Expenses 12 Depreciation Expense 400 13 14 15 fx B D E F G H I -2 Depreciation Expense 400 3 4 5 .6 -7 -8 9 20 1 22 Total Expenses 3 Income Before Income Taxes # -4 Income Tax Expense # 5 Net Income 6 > = Journal Entries Closing Entries T-Accounts Trial Balance Income Statement Balance Sheet + Pioneer Advertising Adjusted Trial Balance October 31, 20x1 Accounts Debit Credit Cash 80,000 Accounts Receivable 74,000 Allowance for Uncollectible Debts 1,480 Prepaid Insurance 5,500 Advertising Materials 10.000 Office Equipment 50,000 Accumulated Depreciation 400 Accounts Payable 25,000 Notes Payable 50,000 Salaries Payable 6,000 Unearned Service Revenue 8,000 Interest Payable 500 Income Taxes Payable 11,592 Common Stock 100,000 Dividend 5,000 III Chegg Study Textbook Solutions Expert Q&A Study Pack Practice Unearned Service Revenue 8,000 Interest Payable 500 Income Taxes Payable 11,592 Common Stock 100,000 Dividend 5,000 Service Revenue 106,000 Salaries Expense 46,000 Rent Expense 9,000 Advertising Materials Expense 15,000 Interest Expense 500 Depreciation Expense 400 Insurance Expense 500 Bad Debts Expense 1,480 Income Tax Expense 11,592 Total 308,972 308,972