The Aggie Graphics Company was organized on January 1, 2016. The trial balance b
ID: 2406499 • Letter: T
Question
The Aggie Graphics Company was organized on January 1, 2016.
The trial balance before adjustment at December 31, 2017 contained the following account balances:
Cash $9,500
Accounts Receivable 4,000
Prepaid Insurance 1,800
Equipment 45,000
Accumulated Depreciation 4,500
Accounts Payable 3,500
Notes Payable 18,000
Common Stock 5,000
Retained Earnings 12,000
Dividend 2,000
Graphic Fees Earned 52,100
Consulting Fees Earned 5,000
Salaries Expense 30,000
Supplies Expense 2,700
Advertising Expense 1,900
Rent Expense 1,500
Utilities Expense 1,700
$100,100 $100,100
Analysis reveals the following additional data: (Assume the books are only closed at year end)
(A) The $2,700 balance in Supplies Expense represents supplies purchased in January. At December 31,
there was $1,200 of supplies on hand.
(B) The note payable was issued on September 1. It is a 3% 6-month note.
(C) The balance in Prepaid Insurance is the premium paid on a one-year policy, dated March 1, 2017.
(D) Consulting Fees are credited to revenue when received. At December 31, consulting fees of $1,000
contracted for January, 2018 have yet to be performed.
(E) The equipment was purchased on January 1, 2016. It has a 10-year useful life and no salvage value.
What is the balance in the interest payable account after adjustment?
A. $ 0
B. $ 45
C. $180
D. $90
E. $270
Determine Net Income after all adjusting entries have been recorded:
A. $ 6,120
B. $13,320
C. $14,710
D. $14,820
E. $ 8,820
Failure to record adjusting entry (D) above would have what effect on the accounting equation:
Assets Liabilities Stockholders’ Equity
A. Overstated Understated Overstated
B No Effect Overstated Understated
C. Understated Understated No Effect
D. No Effect Understated Overstated
E. Understated Understated Overstated
Explanation / Answer
1) Balance in the interest payable account after adjustment= $0 (Because the interest will be accrued and incurred in the following year's feb month)
2)$13320
3) Answer D i.e. Asset - no effect, Liabilities- Understated, Stateholders Equity- overstated.
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