Reference no: EM132998916
The account balances for the Pittman International Company on January 31, 20X1, follow. The balances shown are after the first month of operations.
101 Cash$19,225
401 Fees income$33,125
111 Accounts receivable 3,400
511 Advertising expense 1,850
121 Supplies 2,300
514 Depreciation expense-Equipment 0
131 Prepaid insurance 18,500
517 Insurance expense 0
141 Equipment 35,000
518 Rent expense 2,500
142 Accumulated depreciation-Equipment 0
519 Salaries expense 6,900
202 Accounts payable 6,100
520 Supplies expense 0
301 Reginald Pittman, Capital 54,000
523 Telephone expense 350
302 Reginald Pittman, Drawing 2,150
524 Utilities expense 1,050
Adjustments:
- Supplies used during the month amounted to $1,090.
- The amount in the Prepaid Insurance account represents a payment made on January 1, 20X1, for 6 months of insurance coverage.
- The equipment, purchased on January 1, 20X1, has an estimated useful life of 10 years with no salvage value. The firm uses the straight-line method of depreciation.
Required:
Problem 1: Prepare an income statement, statement of owner's equity, and balance sheet.
Problem 2: Record the balances in the selected general ledger accounts, then journalize and post the adjusting entries.
Problem 3: Analyze if the useful life of the equipment had been 12 years instead of 10 years, how would net income have been affected?