Question

The records of Poorman’s, Inc., revealed the following recorded amounts at December 31, 2009, before adjustments:
Prepaid insurance ........... $ 2,700
Cleaning supplies ........... 3,200
Unearned service fees .......... 2,625
Notes payable ............. 3,000
Service fees ..............125,000
Wages expense ............ 90,000
Truck rent expense ........... 6,500
Truck fuel expense ........... 1,000
Insurance expense ............ 0
Supplies expense ........... 0
Interest expense ............ 0
Interest payable ............ 0
Wages payable ............. 0
Prepaid rent—truck ........... 0

Before Poorman’s prepares the financial statements for the business at December 31, 2009, adjustments must be made for the following items:
a. The prepaid insurance represents an 18-month policy purchased early in January so the policy has been in effect for the entire year.
b. A physical count on December 31 revealed $500 of cleaning supplies on hand.
c. On December 1, a customer paid for three months of service in advance (unearned service fees). One month's revenue has now been earned.
d. The truck rent is $500 per month in advance. January 2010 rent was paid in late December 2009 and was included in truck rent expense for 2009.
e. The bank loan was taken out October 1. The interest rate is 12% (1% per month) for 1 year. No interest expense has been accrued.
f. On Wednesday, December 31, 2009, the company owed its employees for working three days. The normal workweek is five days with wages of $1,500 paid at the end of the week. No expense has been recorded for the last three days of 2009.
Requirements
1. For each item, show the adjustment in the accounting equation.
2. Prepare an income statement for the year ended December 31, 2009, for Poorman’s, Inc.



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  • CreatedSeptember 01, 2014
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