Critical Thinking Problem 5.2 Worksheet and Financial Statements The account bal

Question

Critical Thinking Problem 5.2 Worksheet and Financial Statements The account balances for the Patterson International Company on January 31, 2019, follow. The balances shown are after the first month of operations. 101 Cash 111 Accounts Receivable 121 Supplies 131 Prepaid Insurance 141 Equipment 142 Accu. Depr.-Equip 202 Accounts Payable 301 Roger Patterson, Capital 80,000 523 Telephone Expense 302 Roger Patterson, Drawing S36,950 401 Fees Income $61,850 3,000 6,800 511 Advertising Expense 4,300 514 Depr Expense-Equip 30, 000 517 Insurance Expense 48,000 518 Rent Expense 5000 13,400 0 519 Salaries Expense 12,000 520 Supplies Expense 700 1,700 4,000 524 Utilities Expense Adjustments: a. Supplies used during the month amounted to $2,100. b. The amount in the Prepaid Insurance account represents a payment made on January 1, 2019, for six months of insurance coverage c. The equipment, purchased on January 1, 2019, has an estimated useful life of 10 years with no salvage value. The firm uses the straight-line method of depreclation. Requirec 3. Complete the worksheet. 4. Prepare an income statement, Statement of owner's equity and balance sheet. 5. Record the balances in the general ledger accounts, then journalize and post the adjusting entries. Analyze: If the useful life of the equipment had been 12 years instead of 10 years, how would net income have been affected?

Explanation / Answer

Patterson International Company Month Ended January 31, 2019 Trial Balance Adjustment Adjusted Trial Balance Income Statement Balance Sheet Account Name Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Cash        36,950       36,950              -       36,950 Accounts Receivable          6,800         6,800              -        6,800 Supplies          4,300        2,100         2,200      2,200 Prepaid Insurance        30,000        5,000       25,000     25,000 Equipment        48,000       48,000              -       48,000 Accumulated Dep - Equipment               -          4,800         4,800      4,800 Accounts payable        12,000              -         12,000     12,000 Roger Patterson, Capital        80,000              -         80,000 106,150 Roger Patterson, Drawing          4,000         4,000              -        4,000 Fees Income        61,850              -         61,850     61,850 Advertising Expenses          3,000         3,000              -        3,000 Depreciation exp - Equipment        4,800         4,800      4,800 Insurance Expense        5,000         5,000      5,000 Rent Expenses          5,000         5,000              -        5,000 Salaries Expenses        13,400       13,400              -       13,400 Supplies Expenses               -          2,100         2,100      2,100 Telephone Expenses             700            700              -           700 Utilities Expenses          1,700         1,700              -        1,700 Total       153,850       153,850       11,900       11,900      158,650      158,650     35,700     61,850 122,950 122,950 Supplies Expense 2100 Supplies 2100 To Supplies expense recorded Insurance expense          5,000 Prepaid Insurance          5,000 To record insurance expense Depreciation 4800 Accumulated Dep - Equipment 4800 To record depreciation expense In case the life of equipment was 12 years instead of 10 years, profit would have been higher by 800.

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