In: Accounting
Val’s Hair Emporium is a hair salon. Its unadjusted trial
balance as of December 31, 2017, follows, along with information
about selected accounts.
Account Name | Debit | Credit | Further Information | |||||
Cash | $ | 47,500 | As reported on December 31 bank statement. | |||||
Supplies | 11,900 | Based on count, only $5,100 of supplies still exist. | ||||||
Prepaid Rent | 17,400 | This amount was paid November 1 for rent through the end of January. | ||||||
Accounts Payable | $ | 3,400 |
This represents the total amount of bills received for supplies and utilities through December 15. Val estimates that the company has received $1,400 of utility services through December 31 for which it has not yet been billed. |
|||||
Wages Payable | 0 | Stylists have not yet been paid $340 for their work on December 31. | ||||||
Income Tax Payable | 0 | The company has paid last year’s income taxes but not this year’s taxes. | ||||||
Contributed Capital | 3,900 | This amount was contributed to the company in prior years. | ||||||
Retained Earnings | 4,700 | This is the balance reported at the end of last year. | ||||||
Hair Styling Revenue | 189,800 | Customers pay cash when they receive services. | ||||||
Wages Expense | 38,600 | This is the cost of stylist wages through December 30. | ||||||
Utilities Expense | 17,900 | This is the cost of utilities through December 15. | ||||||
Rent Expense | 58,000 | This year’s rent was $5,800 per month. | ||||||
Supplies Expense | 10,500 | This is the cost of supplies used through November 30. | ||||||
Income Tax Expense | 0 | The company has an average tax rate of 30 percent. | ||||||
Totals | $ | 201,800 | $ | 201,800 | ||||
Required:
1. Calculate the (preliminary) unadjusted net income for
the year ended December 31, 2017.
2 Name the five pairs of balance sheet and income statement
accounts that require adjustment.
3 Name the five pairs of balance sheet and income statement accounts that require adjustment.
4. Prepare the adjusting journal entries that are
required at December 31, 2017. (If no entry is required for
a transaction/event, select "No journal entry required" in the
first account field.)
5-a. Calculate the adjusted net income that the
company should report for the year ended December 31, 2017.
5-b. By how much did the adjustments in
requirement (4) cause net income to increase or decrease?