?TRIAL BALANCE @ ?2/31/2012 70,000 40,000 286,000 180,000 40,000 6,000 PMENT NOT

Question

?TRIAL BALANCE @ ?2/31/2012 70,000 40,000 286,000 180,000 40,000 6,000 PMENT NOTE PAYABLE PREPAID INS DEPRECIATION FOR EQUIPMENT NEEDS TO BE MADE/ PURCHASE OF EQUIP JAN 2012 LIFE OF EQUIPMENT 4 YEARS METHOD OF DEPRECIATION STRAIGHT LINE NOTE PAYABLE 10% USED TO pURCHASE EQUIP JAN 2012 1ST PAYROLL PAID IN JAN 2013 FOR $12,000. $10,000 PERTAINED TO WORK PERFORMED BY EMPLOYEES IN DEC 2012 INSURANCE WAS EFFECTIVE 1/1/2012 AND WAS FOR ONE YEAR PREPARE AN ADJUSTED TR?AL BALANCE @ ?2/31/2012 PREPARE AN INCOME STATEN A TRIAL BALANCE@ 1/1/2013

Explanation / Answer

Workings

1. Depreciation to be provided for the year under straight line method for the entire year =$40000/4=$10000 (Depreciation A/c Dr. to Equipment A/c: $10000)

2. Interest expenses outstanding on notes borrowed to buy the equipment for the entire year=$40000*10%=$4000 (Interest Expenses A/c Dr. to Outstanding Interest Expenses A/c: $4000)

3. Outstanding wages expenses for the month of December, paid in January=$10000 (Wages A/c Dr. to Outstanding Wages A/c: $10000)

4.Insurance was effective from Jan 1 to Dec 31, so it is entirely expended during the year=$36000 (Insurance A/c Dr. to Prepaid Insurance A/c: $36000)

Adjusted trial balance @12/31/2012

Ledgers Dr ($) Cr($)

Cash 70000

Equipment(40000-4000) 36000

Depreciation 4000

Fees Income 286000

Wage Expenses (180000+10000) 190000

Outstanding Wage Expenses 10000

Note Payable 40000

Outstanding Interest Expenses 4000

Interest Expenses 4000

Insurance 36000

Total 340000 340000

Income statement @ 12/31/2012

Particulars $ $

Revenues

Fees Income 286000

Expenditures

Depreciation 4000

Wage Expenses 190000

Interest Expenses 4000

Insurance 36000 234000

Net Profit 52000

Trial balance @1/1/2013 (opening trial balance)

Ledgers Dr ($) Cr($)

Cash 70000

Equipment 36000

Net Profit 52000

Outstanding Wage Expenses 10000

Note Payable 40000

Outstanding Interest Expenses 4000

Total 106000 106000

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