Reference no: EM131712432

Question 1 - Cat's Meow Condos provides pet grooming and boarding services for domestic cats. The company has been in existence for 12 years. At December 31, 2016, Cat's Meow Condo's adjusted trial balance is as follows:

CAT'S MEOW CONDOS Adjusted Trial Balance December 31, 2016
	Debit	Credit
Cash	$84,800
Accounts receivable	32,000
Prepaid insurance	5,200
Equipment	360,000
Accumulation depreciation		$84,000
Accounts payable		9,200
Common stock		202,800
Retained earnings		69,000
Service fees earned		420,000
Miscellaneous income		8,200
Salaries expense	228,000
Rent expense	32,800
Insurance expense	7,200
Depreciation expense	16,800
Income tax expense	51,200
Income tax payable		24.800
	$818,000	$818,000

a. Prepare closing entries in journal entry form. Close to Retained Earnings.

b. After Cat's Meow Condo's closing entries are posted, what is the balance in the Retained Earnings account?

Question 2 - Gilgen's, an upscale restaurant on the beach, has just completed its first full year of operations on December 31, 2016. It provides meals both in its restaurant and catering. Selected balances from its general ledger before year-end adjustments follow. (All balance are normal.)

Cash	$64,000	Accounts payable	$42,400
Accounts receivable	36,000	Common stock	24,000
Prepaid advertising	4,800	Sales revenue	196,000
Supplies	3,600	Wages expense	108,000
Equipment	91,200	Rent expense	12,000
Notes payable	34,000	Utilities expense	5,500

An analysis of the firm's records reveals the following:

a. The balance in Prepaid Advertising represents the amount paid for newspaper advertising for 1 year The agreement, which calls for the same amount of space each month, covers the period from February 1, 2016, to January 31, 2017. Gilgen's did not advertise during its first month of operation.

b. Equipment purchased January 1, 2016, has an estimated life of eight years.

c. Utilities expense does not include the expense for December, estimated at $1,200. The bill will not arrive until January, 2016.

d. At year-end, employees have earned $12,400 in wages that will not be paid until January.

e. Supplies available at year-end amounted to $1,300.

f. At year-end, unpaid interest of $400 has accrued on the notes payable.

g. The firm's lease calls for rent of $1,000 per month payable on the first of each month, plus an amount equal to 1% of annual sales. The rental percentage is payable within 15 days after the end of the year.