Reference no: EM131587408

Question -

The following is an unadjusted trial balance for Lonny Used Car Dealer which opened business on September 1.

Use the following information to prepare adjusting entries for Lonny on December 31, 2016.  Use the general journal given below:

1. There is $1,200 of supplies left at the end of December.

2. Four months of rent was paid for a copy machine on December 1.

3. The loan was money borrowed on September 1 to start the business. It will be paid back at the end of 5 years and the annual interest rate is 9%. Accrue the interest for the 4 months of 2016.

4. Depreciation expense should be recorded for 4 months. The delivery truck has a useful life of 5 years and a salvage value of $2,000. Lonny uses the straight-line depreciation method for trucks

5. It would cost only $9,500 to replace the inventory (market price). Use the lower of cost or market method and adjust the inventory account by debiting cost of goods sold if market is less than the cost.

6. They estimate 10% of accounts receivable will be uncollectible.

7. Prepare the income statement and the balance sheet at the end of 2016. Don't forget to close net income to the capital account so you have the ending balance in that account for the balance sheet. Prepare a multiple step income statement (showing gross profit, income from operations, etc.) and a classified balance sheet (listing current and long-term assets separately and subtotaling each of them). If you merely do revenues less expenses for the income statement, and list all assets, then all liabilities, etc. for the balance sheet you will not get any credit for this part of the assignment-worth half the points.