Reference no: EM13555560

Fernetti Advertising Agency, Inc. was founded by John Fernetti in January of 2010. Presented on page 138 are both the adjusted and unadjusted trial balances as of December 31, 2011.

FERNETTI ADVERTISING AGENCY, INC. Trial Balance December 31, 2011
	Unadjusted		Adjusted
	Dr.	Cr.	Dr.	Cr.
Cash	$ 11,000		$ 11,000
Accounts Receivable	20,000		22,500
Art Supplies	8,600		5,000
Prepaid Insurance	3,350		2,500
Printing Equipment	60,000		60,000
Accumulated Depreciation		$ 28,000		$ 34,000
Accounts Payable		5,000		5,000
Interest Payable		-0-		150
Notes Payable		5,000		5,000
Unearned Advertising		7,200		5,600
Salaries Payable		-0-		1,300
Common Stock		25,000		25,000
Retained Earnings		500		500
Dividends	12,000		12,000
Advertising Revenue		58,600		62,700
Salaries Expense	10,000		11,300
Insurance Expense			850
Interest Expense	350		500
Depreciation Expense			6,000
Art Supplies Expense			3,600
Rent Expense	4,000		4,000
	$129,300		$139,250	$139,250

Instructions

(a) Journalize the annual adjusting entries that were made.

(b) Prepare an income statement and a retained earnings statement for the year ending December 31, 2011, and a balance sheet at December 31.

(c) Answer the following questions.

(1) If the note has been outstanding 6 months, what is the annual interest rate on that note?

(2) If the company paid $12,500 in salaries in 2011, what was the balance in Salaries Payable on December 31, 2010?