Question

Fun Depot is a retail store that sells toys, games, and bicycles. On December 31, 2016, the firm’s general ledger contained the following accounts and balances.
ACCOUNTS AND BALANCES


INSTRUCTIONS
1. Prepare the Trial Balance section of a 10-column worksheet. The worksheet covers the year ended December 31, 2016.
2. Enter the adjustments below in the Adjustments section of the worksheet. Identify each
adjustment with the appropriate letter.
3. Complete the worksheet.

ADJUSTMENTS
a.-b. Merchandise inventory on December 31, 2016, is $148,000.
c. During 2016, the firm had net credit sales of $440,000. The firm estimates that 0.7 percent of these sales will result in uncollectible accounts.
d. On December 31, 2016, an inventory of the supplies showed that items costing $2,960 were on hand.
e. On September 1, 2016, the firm signed a six-month advertising contract for $5,280 with a local newspaper and paid the full amount in advance.
f. On January 2, 2015, the firm purchased store equipment for $32,500. At that time, the equipment was estimated to have a useful life of five years and a salvage value of $3,700.
g. On January 2, 2015, the firm purchased office equipment for $8,400. At that time, the equipment was estimated to have a useful life of five years and a salvage value of $1,200.
h. On December 31, 2016, the firm owed salaries of $8,000 that will not be paid until 2014.
i. On December 31, 2016, the firm owed the employer's social security tax (assume 6.2 percent) and Medicare tax (assume 1.45 percent) on the entire $8,000 of accrued wages.
j. On December 31, 2016, the firm owed federal unemployment tax (assume 0.6 percent) and state unemployment tax (assume 5.4 percent) on the entire $8,000 of accrued wages.
Analyze: If the adjustment for advertising had not been recorded, what would the reported net income havebeen?


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  • CreatedAugust 08, 2014
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