Ch03a - Required: Using the information in a. through d....

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Required: Using the information in a. through d. above, determine the proper amount of net income as of December 31, 2012. Net income (unadjusted) $90,000 a. Record insurance expense of $1,500 per month (4,500) b. Reclassify service revenue as unearned revenue (liability) (3,000) c. Reclassify supplies expense as supplies (asset) 2,250 d. Record interest expense of $600 per month (1% of $60,000) (2,400) Net income (adjusted) $82,350
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Requirement : Record the necessary adjusting entries on December 31, 2012. No prior adjustments have been made during 2012. (a) Debit Credit Unearned Revenue 3,000 Service Revenue 3,000 ( Adjust unearned revenue ) (b) Debit Credit Depreciation Expense 6,000 Accumulated Depreciation 6,000 ( Adjust accumulated depreciation )
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(c) Debit Credit Insurance Expense 1,200 Prepaid Insurance 1,200 ( Adjust prepaid insurance ) (d) Debit Credit Interest Expense 400 Interest Payable 400 ( Adjust interest payable ) (e) Debit Credit Supplies Expense 1,300 Supplies 1,300 ( Adjust supplies )
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Requirement 1: Prepare an income statement for the year ended December 31, 2012. Blue Hens Corporation Income Statement For the year ended December 31, 2012 Service revenue $400,000 Expenses: Salaries $300,000 Rent 15,000 Depreciation 30,000 Interest 4,000 Total expenses 349,000 Net income $ 51,000
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Requirement 2: Prepare a classified balance sheet as of December 31, 2012. Blue Hens Corporation Balance Sheet December 31, 2012 Assets Liabilities Cash $ 11,000 Accounts payable $ 11,000 Accts. receivable 140,000 Salaries payable 10,000 Prepaid rent 5,000 Interest payable 4,000 Supplies 25,000 Total current liabilities 25,000 Total current assets 181,000 Notes payable 30,000 Stockholders’ Equity Equipment 300,000 Common stock 200,000 Accum. depr. (125,000) Retained earnings 101,000 * Total stockholders’ equity 301,000 Total liabilities and stockholders’ equity $356,000 Total assets $356,000 * Retained earnings = beginning retained earnings + net income − dividends = $50,000 + $51,000 − $0 = $101,000
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Requirement 1: Record the necessary closing entries at December 31, 2012. December 31, 2012 Debit Credit Service Revenue 400,000 Retained Earnings 400,000 ( Close revenue accounts ) Retained Earnings 349,000 Salaries Expense 300,000 Rent Expense 15,000 Depreciation Expense 30,000 Interest Expense 4,000 ( Close expense accounts )
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Requirement 2: Prepare a post-closing trial balance. Blue Hens Corporation Post-Closing Trial Balance December 31, 2012 Accounts Debit Credit Cash $ 11,000 Accounts receivable 140,000 Prepaid rent 5,000 Office supplies 25,000 Equipment 300,000 Accumulated depreciation $125,000 Accounts payable 11,000 Salaries payable 10,000 Interest payable 4,000 Notes payable 30,000 Common stock 200,000 Retained earnings 101,000 Totals $481,000 $481,000
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Additional Perspective 3-1: The following transactions occur over the remainder of the year. Aug.
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This note was uploaded on 02/23/2012 for the course MGMT 200 taught by Professor Greigg during the Summer '08 term at Purdue University-West Lafayette.

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Ch03a - Required: Using the information in a. through d....

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