Polonius Theatre Co. (PTC) has reported pre-tax income of $280,000 for 2020 before the December 31 year-end
Question:
Polonius Theatre Co. (PTC) has reported pre-tax income of $280,000 for 2020 before the December 31 year-end adjusting entries have been made. The controller has given you five items to review.
1) On September 1, 2020, PTC borrowed $42,000 in the form of a note payable from the bank. The note carries 7% interest, and is due to be repaid on March 1, 2021.
2) On May 31, 2020, PTC entered into a contract to provide services to a customer for 15 months. The services are to be provided evenly over the term of the contract. The customer paid the $18,000 fee in full on June 1, and PTC credited the amount to Service Revenue.
3) On August 1, 2020, PTC paid for one year of rent on a warehouse to store its theatre equipment. The $48,000 amount was debited to Prepaid Rent when it was paid.
4) Depreciation on office equipment has not been recorded; for 2020, depreciation on the office equipment is $17,000
5) The December utilities bill has not been received as of December 31. PTC has equalized billing for its utilities, and each month’s bill is $950.
a) Prepare any adjusting entries needed at December 31, 2020 for the items identified
b) Assuming PTC has a 30% tax rate, calculate net income for PTC for 2020.
Auditing a business risk appraoch
ISBN: 978-0324375589
6th Edition
Authors: larry e. rittenberg, bradley j. schwieger, karla m. johnston