Learn to Play, Inc. is a one-person company that provides private piano lessons. Its unadjusted trial balance at December 31, 2017, follows, along with information about selected accounts. 

Required: 

1. Calculate the (preliminary) unadjusted net income for the year ended December 31, 2017. 

2. Name the five pairs of balance sheet and income statement accounts that require adjustment. 

3. Calculate the desired balances for each account listed in the unadjusted trial balance. 

4. Prepare the adjusting journal entries that are required at December 31, 2017. 

5. Calculate the adjusted net income that the company should report for the year ended December 31, 2017. By how much did the adjustments in requirement 4 cause net income to increase or decrease?

Transcribed Image Text:

Account Names Debit Credit Further Information Cash $ 23,800 As reported on December 31 bank statement. Supplies 300 Based on count, only $200 of supplies still exist. Deferred Revenue $ 1,500 Of this amount, $500 was received for December lessons and $1,000 for January lessons. Employees were paid $500 for ten days of work through December 28. They have not yet been paid for work on December 29 and 30. Wages Payable Income Tax Payable The company has paid last year's income tax but not this year's tax. Interest Payable The company has not paid the $100 of interest owed on its note payable for the current period. Note Payable Contributed Capital 12,000 This one-year note was taken out this year on December 1. 1,000 This amount was contributed to the company in prior years. Retained Earnings 3,000 This is the balance reported at the end of last year. Lesson Revenue 25,500 Most customers pay cash for lessons each time they are provided, but some customers pay in advance. Employees worked through December 30, but did not work on December 31. Wages Expense Supplies Expense 18,100 800 This is the cost of supplies used through November 30. The company has not paid the $100 of interest owed on its note payable for the current period. Interest Expense Income Tax Expense The company has an average tax rate of 30 percent. Totals $43,000 $43,000