b. Using figures from the company’s unadjusted trial balance in conjunction with the adjusting entries made in part a, compute net income for the year ended December 31. what is the correct answer of b?
b. Using figures from the company’s unadjusted trial balance in conjunction with the adjusting entries made in part a, compute net income for the year ended December 31. what is the correct answer of b?
b. Using figures from the company’s unadjusted trial balance in conjunction with the adjusting entries made in part a, compute net income for the year ended December 31. what is the correct answer of b?
b. Using figures from the company’s unadjusted trial balance in conjunction with the adjusting entries made in part a, compute net income for the year ended December 31.
what is the correct answer of b?
Transcribed Image Text:2,820
21,480
$ 368,568
Utilities expense
Income taxes expense
$ 368,568
Required A
Required B
Required C
Required D
Required E
Other Data
Using figures from the company's unadjusted trial balance in conjunctic
net income for the year ended December 31.
1. Records show that $5,280 in studio revenue had not yet been billed or recorded as of December 31.
2. Studio supplies on hand at December 31 amount to $8,280.
3. On August 1 of the current year the studio purchased a six-month insurance policy for $1,800. The entire premium was initially
debited to Unexpired Insurance.
4. The studio is located in a rented building. On November 1 of the current year the studio paid $7,200 rent in advance for November,
December, and January. The entire amount was debited to Prepaid Studio Rent.
5. The useful life of the studio's recording equipment is estimated to be five years (or 60 months). The straight-line method of
depreciation is used.
6. On May 1 of the current year the studio borrowed $19,200 by signing a 12-month, 9 percent note payable to First Federal Bank of
St. Louis. The entire $19,200 plus 12 months' interest is due in full on April 30 of the upcoming year.
7. Records show that $4,320 of cash receipts originally recorded as Unearned Studio Revenue had been earned as of December 31.
8. Salaries earned by recording technicians that remain unpaid at December 31 amount to $648.
9. The studio's accountant estimates that income taxes expense for the entire year ended December 31 is $23,520. (Note that
$21,480 of this amount has already been recorded.)
KEN HENSLEY ENTERPRISES, INC.
Income Statement
For the Year Ended December 31, Current Year
Revenues:
Studio revenue earned
Expenses:
Salaries expense
Supplies expense
Insurance expense
Depreciation expense: recording equipment
Recording equipment
Studio rent expense
Required:
Utilities expense
a. For each of the numbered paragraphs, prepare the necessary adjusting entry.
b. Using figures from the company's unadjusted trial balance in conjunction with the adjusting entries made in part a, compute net
income for the year ended December 31.
c. Was the studio's monthly rent for the last 2 months of the current year more or less than during the first 10 months of the year?
d. Was the studio's monthly insurance expense for the last five months of the current year more or less than the average monthly
expense for the first seven months of the year?
e. If the studio purchased all of its equipment when it first began operations, for how many months has it been in business?
f. Indicate the effect of each adjusting entry prepared in part a on the major elements of the company's income statement and balance
sheet. Organize your answer in tabular form using the column headings shown. Use the symbols I for increase, D for decrease, and NE
for no effect. The answer for the adjusting entry number 1 is provided as an example.
Interest expense
Income taxes expense
Total expenses
$
Net income
$
< Required A
Re
Transcribed Image Text:Ken Hensley Enterprises, Inc., is a small recording studio in St. Louis. Rock bands use the studio to mix high-quality demo recordings
distributed to talent agents. New clients are required to pay in advance for studio services. Bands with established credit are billed for
studio services at the end of each month. Adjusting entries are performed on a monthly basis. Below is an unadjusted trial balance
dated December 31 of the current year. (Bear in mind that adjusting entries have already been made for the first 11 months, but not for
December.)
KEN HENSLEY ENTERPRISES, INC.
UNADJUSTED TRIAL BALANCE
DECEMBER 31, CURRENT YEAR
$ 51,804
97,680
9,120
600
Cash
Accounts receivable
Studio supplies
Unexpired insurance
Prepaid studio rent
Recording equipment
Accumulated depreciation: recording equipment
Notes payable
Interest payable
Income taxes payable
Unearned studio revenue
4,800
108,000
$ 63,000
19,200
1,008
3,840
11,520
96,000
45,600
128,400
Capital stock
Retained earnings
Studio revenue earned
Salaries expense
Supplies expense
Insurance expense
Depreciation expense: recording equipment
Studio rent expense
Interest expense
Utilities expense
Income taxes expense
21,600
1,440
3,216
19,800
25,200
1,008
2,820
21,480
$ 368,568
$ 368,568
Other Data
1. Records show that $5,280 in studio revenue had not yet been billed or recorded as of December 31.
2. Studio supplies on hand at December 31 amount to $8,280.
3. On August 1 of the current year the studio purchased a six-month insurance policy for $1,800. The entire premium was initially
Definition Definition Entries made at the end of every accounting period to precisely replicate the expenses and revenue of the current period. This is also known as end of period adjustment. It can also refer to financial reporting that corrects errors made previously in the accounting period. Every adjustment entry affects at least one real account and one nominal account.
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