Justin Park is a lawyer specializing in corporate tax law. He began his practice on January 1. A chart of accounts and trial balance taken on December 31, 20-, are provided on below.

 

 Information for year-end adjustments is as follows:

(a) Office supplies on hand at year-end amounted to $300.

(b) On January 1, 20-, Park purchased office equipment costing $15,000 with an expected life of five years and no salvage value.

(c) Computer equipment costing $6,000 with an expected life of three years and no salvage value was purchased on July 1, 20-. Assume that Park computes depreciation to the nearest full month.

(d) A premium of $1,200 for a one-year insurance policy was paid on December 1, 20-.

(e0 Wages earned by Park's part-time secretary, which have not yet been paid, amount to $300.

Assets		Revenue
101	Cash	401	Client Fees
142	Office Supplies
145	Prepaid Insurance	Expenses
181	Office Equipment	511	Wages Expense
181.1	Accumulated Depr.—	521	Rent Expense
	Office Equipment	523	Office Supplies Expense
187	Computer Equipment	525	Phone Expense
187.1	Accumulated Depr.—	533	Utilities Expense
	Computer Equipment	535	Insurance Expense
Liabilities		541	Depr. Expense—
201	Notes Payable		Office Equipment
202	Accounts Payable	542	Depr. Expense—
219	Wages Payable		Computer Equipment
Owner's Equity
311	Justin Park, Capital
312	Justin Park, Drawing

Prepare the work sheet for the year ended December 31, 20-.

A worksheet aids the preparation of financial statements. In preparing a worksheet, the first step is to prepare the trial balance in the first two columns. The balances on the debit and credit sides are both $56,900.

The second step is the preparation of the adjustments. The following are adjustments to be entered on the adjustment column:

(a) debit of $500 to office supplies expense; credit of $500 to office supplies for the used portion

(b) debit of $3,000 to depreciation expense - office equipment; credit of $3,000 to accumulated depreciation - office equipment for wear and tear of equipment

(c) debit of $1,000 to depreciation expense - computer equipment; credit of $1,000 to accumulated depreciation - computer equipment for wear and tear of equipment

(d) debit of $100 to insurance expense; credit of $100 to prepaid insurance for the expired portion

(e) debit of $300 to wages expense; credit of $300 to wages payable for the accrued salaries

The totals of the adjustments are $4,900 on both the debit and credit sides. The year-end adjustments affect the accounts balances. Therefore, there is a need to prepare an adjusted trial and enter the balances on the third pair of columns. The adjusted trial balance shows balances of $61,200 for both the debit and credit sides. The amounts are extended on the appropriate column of income statement and balance sheet.

The net income is $13,200. The income statement column shows balances of $40,000 on the debit and credit side. The balance sheet column shows balances of $34,400 on the debit and credit sides.