Chapter 3, Problem 68PB

Record adjustments and prepare income statement. (LO 1, 2, 3, 4). Selected amounts (at December 31, 2012) from the accounting records of Dan’s Billiard Supply Company are shown here. No adjustments have been made.

Requirements

1. 1. Five adjustments need to be made before the financial statements for the year ended December 31, 2012, can be prepared. Show each in an accounting equation worksheet.
   1. a. The equipment (purchased on January 1, 2012) has a useful life of 10 years with no salvage value (equal amount of depreciation each year).
   2. b. Interest on the notes payable needs to be accrued for the year in the amount of $60,000.
   3. c. Unexpired insurance at December 31, 2012, is $25,000.
   4. d. The rent payment of $175,000 was made on May 1. The rent payment is for 12 months beginning on the date of payment.
   5. e. Salaries of $65,000 were earned but unrecorded and unpaid at December 31, 2012.
2. 2. Prepare an income statement for the year ended December 31, 2012, for Dan’s Billiard Supply Company.