End-Of-Period Adjustments - Selected Computations
Allied Architects Adjusts Its Books

question 114

Essay

End-of-period adjustments - selected computations
Allied Architects adjusts its books each month and closes its books at the end of the year. The trial balance at January 31, 2010, before adjustments is as follows:
The following information relates to month-end adjustments:
(a) According to contracts, consulting fees received in advance that were earned in January total $13,500.
(b) On November 1, 2009, the company paid in advance for 5 months' advertising in professional journals.
(c) At January 31, supplies on hand amount to $2,250.
(d) The equipment has an original estimated useful life of 4 years.
(e) The corporation is subject to income taxes of 25% of taxable income. (Assume taxable income is the same as "income before taxes.")
$\begin{array}{|l|c|}\hline & \text { Debit }&\text { Credit }\\\hline \text { Cash. } & \$ 39,645 \\\hline \text { Accounts Receivable } & 27,000 \\\hline \text { Supplies}& 3,375 \\\hline \text { Prepaid Advertising } & 7,560 \\\hline \text { Equipment. } & 64,800 \\ \hline \text { Accumulated Depreciation: Equipment } && \$ 22,500 \\\hline\text { Unearned Consulting Fees} && 17,550 \\\hline \text { Income Taxes Payable } && 15,840 \\\hline \text { Capital Stock. } && 18,000 \\\hline \text { Retained Earnings. } && 23,850 \\\hline \text { Consulting Fees Earned. } && 78,570 \\\hline \text { Salaries Expe } & 28,800 \\\hline \text { Utilities Expense }& 1,080 \\\hline\text { Rent Expense } & 4,050 \\\hline&\$176,310&\$176,310\\\hline\end{array}$
1) After the proper adjusting entry is made, what is the balance in the Unearned Consulting Fees account at January 31 ? $\quad$$\quad$ $______
2) Compute the amount to be reported in the January income statement for the following:
Advertising Expense $\quad$$\quad$ $______
Supplies Expense $\quad$ $\quad$$\quad$ $______

3) What is the book value of the equipment at January 31 after the proper adjusting entry is recorded? $\quad$ $_____
4) Using the above information, compute the amount of net income or loss to be shown in the January income statement. Net income for January $\quad$ $_____

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Definitions:

Stockholders' Equity

Represents the residual value of assets minus liabilities, indicating the ownership interest of shareholders in a company.

Accounts Receivable

Company-expected payments for goods or services given to customers, pending settlement.

Inventory

Inventory encompasses the goods and materials a business holds for the purpose of resale or production.

Net Fixed Assets

Net Fixed Assets represent the total value of a company's property, plant, and equipment minus depreciation, indicating the actual value of a company's fixed assets.