Question

Following is a list of financial statement items from Sugar & Spice Cookie Company as of December 31, 2010:
Prepaid insurance ...... $ 6,000
Prepaid rent .......... 10,000
Wages expense ........ 25,000
Unearned subscription revenue . 70,000
Interest expense ....... 38,000

Additional information is as follows:
• The company paid a $7,200 premium on a three-year business insurance policy on July 1, 2009. (Six months’ worth was expensed on the income statement for the year ended December 31, 2009.) No expense has been recorded for the year ended December 31, 2010.
• Sugar & Spice borrowed $200,000 on January 2, 2010, and must pay 11% interest on January 2, 2011, for the entire year of 2010. The interest expense on this loan has not been recorded for 2010.
• The books show that $60,000 of the unearned subscription revenue has now been earned.
• The company paid 10 months of rent in advance on November 1, 2010. No rent expense has been booked for 2010.
• The company will pay wages of $2,000 for December 31, 2010, to employees on January 3, 2011. This amount is not included in the balance shown for wages expense.

Requirements
1. Use the accounting equation to show the adjustments that must be made prior to the preparation of the financial statements for the year ended December 31, 2010.
2. Calculate the account balances that would appear on the financial statements for the year ended December 31, 2010; balance sheet at December 31, 2010.



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  • CreatedSeptember 01, 2014
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