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