Love Online is an Internet dating agency. All members pay in advance to be listed in the
Question:
Love Online is an Internet dating agency. All members pay in advance to be listed in the database. Advance payments are credited to an account called Unearned Client Fees. Adjusting entries are performed on a monthly basis and closings are done on December 31. An unadjusted trial balance dated December 31, 2021, follows:
LOVE ONLINE, INC.
UNADJUSTED TRIAL BALANCE
31 DECEMBER. 2021
DEBIT | CREDIT | |
CASH | 32,800 | |
ACCOUNTS RECEIVABLE | 17,000 | |
PREPAID RENT | 4,000 | |
UNEXPIRED INSURANCE | 12,000 | |
OFFICE SUPPLIES | 2,500 | |
COMPUTER EQUIPMENT | 60,000 | |
ACCUMULATED DEPRECIATION: COMPUTER EQUIPMENT | 6,000 | |
ACCOUNTS PAYABLE | 10,000 | |
NOTES PAYABLE | 30,000 | |
UNEARNED CLIENT FEES | 15,000 | |
CAPITAL STOCK | 40,000 | |
RETAINED EARNINGS | 38,000 | |
DIVIDENDS | 3,500 | |
CLIENT FEES EARNED | 54,000 | |
SALARIES EXPENSE | 21,000 | |
DEPRECIATION EXPENSE COMPUTER EQUIPMENT | 5,500 | |
INSURANCE EXPENSE | 11,500 | |
RENT EXPENSE | 22,000 | |
OFFICE SUPPLIES EXPENSE | 3,700 | |
TOTAL | 193,000 | 193,000 |
The following information relates to the Company’s month-end adjustments:
1. Office supplies consumed during the month amounted to $900.
2. On December 1, the company paid $12,000 to renew its insurance policy for a period of 12 months. Adjust the monthly insurance expense.
3. The useful life of the computer equipment was estimated to be 10 years (120 months).
4. Fees recorded as Unearned Client Fees in the amount of $8,000 were earned during the current month of December.
5. On December 1, the company borrowed $30,000 by signing a 9-month, 9% note payable. The entire note, plus 9 months’ interest, is due August 31st, 2022. Record the interest expense for December.
6. On December 1, Love Online had moved into the new facilities and had paid $4,000 for 2 months' rent in advance.
7. Client fees already earned during December but not yet billed or recorded amounted to $25,000.
Required
- Post all adjustments on the ledger accounts (T- accounts)
- Prepare closing entries.
- Prepare an Income Statement.
- Prepare a Statement of Retained Earnings.
- Prepare a Balance Sheet.
Financial Accounting
ISBN: 978-0077862381
16th edition
Authors: Jan Williams, Susan Haka, Mark S Bettner, Joseph V Carcello