Reference no: EM132881407

Questions -

Q1. Sweeney & Allen, a large marketing firm, adjusts its accounts at the end of each month. The following information is available for the year ending December 31.

1 A bank loan had been obtained on December 1. Accrued interest on the loan at December 31 amounts to $1,120. No interest expense has yet been recorded.

2 Depreciation of the firm's office building is based on an estimated life of 30 years. The building was purchased four years ago for $310,000.

3 Accrued, but unbilled, revenue during December amounts to $66,000.

4 On March 1, the firm paid $1,300 to renew a 12-month insurance policy. The entire amount was recorded as Prepaid Insurance.

5 The firm received $15,000 from King Biscuit Company in advance of developing a six-month marketing campaign. The entire amount was initially recorded as Unearned Revenue. At December 31, $2,600 had actually been earned by the firm.

6 The company's policy is to pay its employees every Friday. Since December 31 fell on a Wednesday, there was an accrued liability for salaries amounting to $2,300.

Required -

a. Record the necessary adjusting journal entries on December 31.

b. By how much did Sweeney & Allen's net income increase or decrease as a result of the adjusting entries performed in part a? (Ignore income taxes.)