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.