Income statement and statement of retained earnings

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Reference no: EM1314623

Preparation of income statement and statement of retained earnings from trail balance.

Complete Problem P3-7 (Adjusting Entires and Financial Statements) Ana Alicia Advertising
Corp. was founded in January 2003. Presented on the next page are the adjusted and unadjusted trial balances as of December 31, 2007

	Ana Alicia Advertising Corp. Trial Balance December 31,2007
	Unadjusted	Adjusted
Dr.	Cr.	Dr	Cr
Cash	$7,000		$7,000
Accounts Receivable	19,000		22,000
Art Supplies	8,500		5,500
Prepaid Insurance	3,250		2,500
Printing Equipment	60,000		60,000
Accumulated Depreciation		$27,000		$33,750
Accounts Payable		5,000		5,000
Interest Payable				150
Notes Payable		5,000		5,000
Unearned Service Revenue		7,000		5,600
Salaries Payable				1,500
Common Stock		10,000		10,000
Retained Earnings		4,500		4,500
Service Revenue		58,600		63,000
Salaries Expense	10,000		11,500
Insurance Expense			750
Interest Expense	350		500
Depreciation Expense	6,750
Art Supplies Expense	5,000		8,000
Rent Expense	4,000		4,000
	$117,000	$117,000	$128,500	$128,500

Instructions
a) Journalize the annual adjusting entries that were made.
b) Prepare an income statement and a statement of retained earnings fort he year ending December 31, 2007, and an unclassified balance sheet at December 31, 2007.
c) Answer the following questions.

1) If the useful life of equipment is 8 years, what is the expected salvage life?
2) If the note has been outstanding 3 months, what is the annual interest rate on that note?
3) If the company paid $12,500 in salaries in 2007, what was the balance in Salaries Payable on December 31, 2006?

Reference no: EM1314623

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