Reference no: EM131911426
Problem -
Fall, Inc. - The following unadjusted trail balance is presented for Fall, Inc. as of December 31, 2013.
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Unadjusted Trial Balance
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|
Account
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Debit
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Credit
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Cash
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100,000
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|
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Accounts receivable
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200,000
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|
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Interest receivable
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0
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|
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Rent receivable
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0
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|
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Merchandise inventory
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300,000
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|
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Prepaid rent
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25,000
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|
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Supplies
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75,000
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|
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Plant & equipment
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500,000
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|
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Accumulated depreciation
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150,000
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Investment in government bonds
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100,000
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|
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Accounts payable
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100,000
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Interest payable
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0
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Wages payable
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0
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Unearned revenue
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30,000
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Notes payable
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20,000
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Common stock
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300,000
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Retained earnings
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400,000
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Sales
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1,200,000
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Interest Income
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0
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Rent Income
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0
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Cost of goods sold
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600,000
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|
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Advertising expense
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50,000
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|
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Depreciation expense
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0
|
|
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Insurance expense
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50,000
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|
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Interest expense
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0
|
|
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Rent expense
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0
|
|
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Supplies expense
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0
|
|
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Wages expense
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150,000
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|
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Dividends
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50,000
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|
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$2,200,000
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$2,200,000
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Fall, Inc. used the following information to prepare adjusting journal entries on December 31, 2013.
a. Depreciation expense in the amount of $50,000 is recorded each year.
b. A physical count of the merchandise inventory indicates that $100,000 is on hand at the end of the year.
c. The company made a $25,000 rent payment on May 1, which covers the subsequent twelve- month period. (round to the nearest whole dollar)
d. A physical count indicates that $35,000 of supplies is on hand at the end of the year.
e. The company will pay employees $30,000 for wages earned for the thirty-day period ending January 15, 2014. Assume that the $30,000 is earned at a rate of $1,000 per day.
f. On October 1, 2013, the company began renting office space to a small business. The contract calls for rent receipts of $2,000 per month. No rent has been received as of the end of the year.
g. The $20,000 note payable was issued on September 1, 2013. It matures on January 1, 2016 and has a stated annual interest rate of 2%. [Compute by months, not days] (round to the nearest whole dollar)
h. As of the end of the period, one-half of the unearned sales have been earned.
i. Unrecorded interest for 2013 on US government bonds is $500. (The interest was earned during 2013 but will not be received until 2014.)
Required:
1. Prepare the adjusting journal entries for Fall, Inc. for 2013.
2. Prepare the closing journal entries.
3. In good form, prepare the income statement for 2013. Include a proper heading.
4. In good form prepare the balance sheet as of December 31, 2013. Include a proper heading.
5. Compute the following ratios for 2013:
a. Current ratio
b. Debt-to-equity ratio
c. Profit margin
Show work area for T accounts and Adjusted Trial Balance or attached a working trial balance.
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