The following is the preclosing trial balance of Ralph Retailers, Inc.:

The following additional information is provided:

a. The company paid a salary advance of $5,000 to one of its employees, a total that was debited to the Salaries expense account. This was an advance against the employee’s salary for the year 20X2.

b. On January 1, 20X1, the company paid an insurance premium of $15,000, which was debited to the Insurance expense account. The premium provided insurance coverage for 18 months beginning on January 1, 20X1.

c. The company decided to revise its estimate of bad debts expense by calculating it at 5% of its sales revenue.

d. On December 31, 20X1, the company’s board of directors declared a dividend of $20,000, payable in January 20X2. No journal entry was recorded.

Required:

1. Prepare the necessary adjusting entries for the year ended December 31, 20X1.

2. Prepare an income statement for the year ended December 31, 20X1. Ignore income taxes.

3. Prepare a balance sheet as of December 31, 20X1.

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Preclosing Trial Balance as of December 31, 20X1 DR CR $ 38,700 71,600 Cash Accounts receivable Prepaid rent Inventory Equipment Building 12,000 125,000 50,000 125,000 Allowance for doubtful accounts $ 3,000 Accumulated depreciation-equipment Accumulated depreciation-building Advance from customers 40,000 12,000 18,000 26,000 Accounts payable Salaries payable Capital stock Retained earnings 1/1/20X1 5,500 70,000 264,850 425,000 Sales revenue Cost of goods sold Salaries expense Bad debt expense Rent expense Insurance expense 276,250 60,000 18,300 40,000 Depreciation expense-building Depreciation expense-equipment Dividends 15,000 6,000 3,000 23,500 Totals $864,350 $864, 350