6 P32 (Adiusting Entries and Financial Statements) Mason Advertising Agency was

Question

6 P32 (Adiusting Entries and Financial Statements) Mason Advertising Agency was founded in January 56 2011. Presented below are adjusted and unadjusted trial balances as of December 31, 2015 MASON ADVERTISING AGENCY TRIAL BALANCE DECEMBER 31, 2015 Adjusted Unadjusted Dr. Cr Cr. Dr. 11,000 23,500 3,000 2,500 60,000 Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accumulated Depreciation-Equipment Accounts Payable Interest Payable Notes Payable Unearned Service Revenue Salaries and Wages Payable Share Capital-Ordinary Retained Earnings Service Revenue Salaries and Wages Expense Insurance Expense Interest Expense Depreciation Expense Supplies Expense Rent Expense 11,000 20,000 8,400 3,350 60,000 28,000 5,000 33,000 5,000 150 5,000 5,600 1,300 10,000 3,500 63,500 5,000 7,000 10,000 3,500 58,600 10,000 11,300 850 500 5,000 5,400 350 4,000 117,100 117,100127,050 127,050 Instructions (a) Journalize the annual adjusting entries that were made. (Omit explanations.) (b) Prepare an income statement and a retained ear nings statement for the year ending December 31, 2015, and an unclassified statement of financial position at December 31. Answer the following questions (1) If the note has been outstanding 3 months, what is the annual interest rate on (2) If the company paid 12,500 in salaries in 2015, what was the balance in Salaries (c) that note? and Wages Payable on December 31, 2014?

Explanation / Answer

a Journalize the annual adjusting entries that were made In Euro In Euro Transactions Debit Credit Accounts Receivable 3500 To Service Revenue 3500 Supplies Expense 5400 To Supplies 5400 Insurance Expense 850 To Prepaid Insurance 850 Depreciation 5000 To Accumulated Depreciation - Equipment 5000 Interest Expense 150 To Interest Payable 150 Unearned Service Revenue 1400 To Service Revenue 1400 Salaries and Wages Expense 1300 To Salaries and Wages Payable 1300 b Prepare an income statement and a retained earnings statement for the year ending December 31, 2015 and an unclassified statement of financial position at December 31 MASON ADVERTISING AGENCY INCOME STATEMENT 31-Dec-15 In Euro Service Revenue 63500 Less : Rent Expense 4000 Supplies Expense 5400 Depreciation Expense 5000 Insurance Expense 850 Salaries and Wages Expense 11300 Interest Expense 500 27050 Net Profit 36450 MASON ADVERTISING AGENCY RETAINED EARNINGS 31-Dec-15 In Euro Retained Earnings, Beg 3500 Add : Net Profit, Current year 36450 Retained Earnings, Ending 39950 MASON ADVERTISING AGENCY UNCLASSIFIED BALANCE SHEET 31-Dec-15 ASSETS In Euro Cash 11000 Accounts Receivable 23500 Supplies 3000 Prepaid Insurance 2500 Equipment 60000 Less : Accumulated Depreciation 33000 27000 Total Assets 67000 LIABILITIES Accounts Payable 5000 Interest Payable 150 Notes Payable 5000 Unearned Service Revenue 5600 Salaries and Wages Payable 1300 Share Capital - Ordinary 10000 Retained Earnings 39950 Total Liabilities 67000 c 1 If the note has been outstanding 3 months, what is the annual interest rate on that note Based on interest payable, interest per month is 150/3 = 50 per month= 0.01% per month = 12% per year 2 If the company paid Euro 12500 in salaries in 2015 what was the balance in Salaries and Wages Payable on December 31, 2014 Salaries and Wages Expense 11300 Less : Salaries and Wages payable, 31/12/15 1300 10000 Payments made in 2015 12500 Salaries and Wages payable, 31/12/14 2500

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