Preparation of income statement and statement of retained earnings from trail balance.
Complete Problem P3-7 (Adjusting Entires and Financial Statements) Ana Alicia Advertising
Corp. was founded in January 2003. Presented on the next page are the adjusted and unadjusted trial balances as of December 31, 2007
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Ana Alicia Advertising Corp.
Trial Balance
December 31,2007
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Unadjusted
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Adjusted
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Dr.
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Cr.
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Dr
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Cr
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Cash
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$7,000
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$7,000
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Accounts Receivable
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19,000
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22,000
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Art Supplies
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8,500
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5,500
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Prepaid Insurance
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3,250
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2,500
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Printing Equipment
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60,000
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60,000
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Accumulated Depreciation
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$27,000
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$33,750
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Accounts Payable
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5,000
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5,000
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Interest Payable
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150
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Notes Payable
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5,000
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5,000
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Unearned Service Revenue
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7,000
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5,600
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Salaries Payable
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1,500
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Common Stock
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10,000
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10,000
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Retained Earnings
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4,500
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4,500
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Service Revenue
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58,600
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63,000
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Salaries Expense
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10,000
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11,500
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Insurance Expense
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750
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Interest Expense
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350
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500
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Depreciation Expense
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6,750
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Art Supplies Expense
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5,000
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8,000
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Rent Expense
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4,000
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4,000
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$117,000
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$117,000
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$128,500
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$128,500
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Instructions
a) Journalize the annual adjusting entries that were made.
b) Prepare an income statement and a statement of retained earnings fort he year ending December 31, 2007, and an unclassified balance sheet at December 31, 2007.
c) Answer the following questions.
1) If the useful life of equipment is 8 years, what is the expected salvage life?
2) If the note has been outstanding 3 months, what is the annual interest rate on that note?
3) If the company paid $12,500 in salaries in 2007, what was the balance in Salaries Payable on December 31, 2006?