Reference no: EM131911426

Problem -

Fall, Inc. - The following unadjusted trail balance is presented for Fall, Inc. as of December 31, 2013.

	Unadjusted Trial Balance
Account	Debit	Credit
Cash	100,000
Accounts receivable	200,000
Interest receivable	0
Rent receivable	0
Merchandise inventory	300,000
Prepaid rent	25,000
Supplies	75,000
Plant & equipment	500,000
Accumulated depreciation		150,000
Investment in government bonds	100,000
Accounts payable		100,000
Interest payable		0
Wages payable		0
Unearned revenue		30,000
Notes payable		20,000
Common stock		300,000
Retained earnings		400,000
Sales		1,200,000
Interest Income		0
Rent Income		0
Cost of goods sold	600,000
Advertising expense	50,000
Depreciation expense	0
Insurance expense	50,000
Interest expense	0
Rent expense	0
Supplies expense	0
Wages expense	150,000
Dividends	50,000
	$2,200,000	$2,200,000

Fall, Inc. used the following information to prepare adjusting journal entries on December 31, 2013.

a. Depreciation expense in the amount of $50,000 is recorded each year.

b. A physical count of the merchandise inventory indicates that $100,000 is on hand at the end of the year.

c. The company made a $25,000 rent payment on May 1, which covers the subsequent twelve- month period. (round to the nearest whole dollar)

d. A physical count indicates that $35,000 of supplies is on hand at the end of the year.

e. The company will pay employees $30,000 for wages earned for the thirty-day period ending January 15, 2014. Assume that the $30,000 is earned at a rate of $1,000 per day.

f. On October 1, 2013, the company began renting office space to a small business. The contract calls for rent receipts of $2,000 per month. No rent has been received as of the end of the year.

g. The $20,000 note payable was issued on September 1, 2013. It matures on January 1, 2016 and has a stated annual interest rate of 2%. [Compute by months, not days] (round to the nearest whole dollar)

h. As of the end of the period, one-half of the unearned sales have been earned.

i. Unrecorded interest for 2013 on US government bonds is $500. (The interest was earned during 2013 but will not be received until 2014.)

Required:

1. Prepare the adjusting journal entries for Fall, Inc. for 2013.

2. Prepare the closing journal entries.

3. In good form, prepare the income statement for 2013. Include a proper heading.

4. In good form prepare the balance sheet as of December 31, 2013. Include a proper heading.

5. Compute the following ratios for 2013:

a. Current ratio

b. Debt-to-equity ratio

c. Profit margin

Show work area for T accounts and Adjusted Trial Balance or attached a working trial balance.