Internet Consulting Service, Inc., adjusts its accounts every month, On the following page is the company’s year-end unadjusted trial balance dated December 31, 2011. (Bear in mind that adjust- ing entties already have been made for the first 11 months of 2011, but have aor been made for December.) Other Data 1. On December 1, the company signed a new rental agreement and paid three months? rent in advance at a rate of $2,100 per month, This advance payment was debited to the Prepaid Office Rent account. 2. Dues and subscriptions expiring during December amounted to $50. 3. Ancstimate of supplies on hand was made at December 31; the estimated cost of the unused supplies was $450. 4. The useful life of the equipment has been estimated at five years (60 months) from date of acquisition, 5. Accrued interest on notes payable amounted to $100 at year-end. (Set up accounts for Interest Expense and for Interest Payable.) 6. Consulting services valued at $2,850 were rendered during December to clients who had made payment in advance. Stags is ON a Ie eS eee cash $ 49,100 Consuting 0s raceivasio zac ropa ofc rent 630 Prepaid duos ard subecnptone 30 supmes. ow Income tates payable ‘2.000 Unearned consulta foes. 5.60 Capial stock. 20,000 Retained eamings. 2.70 Dividence ero Consuling ees cared 257,190 Salasesorpanse as “Telephone expense 250 Sunplesexpente: ‘600 Depreciation expense: equbment 660 Niscatanoous expenses 4207. Itis the custom of the firm to bill clients only when consulting work és completed or, in the case of prolonged engagements, at monthly intervals. At December 31. consulting services valued at $11,000 had been rendered 10 clients but not yet billed. No advance payments had ‘been received from these clients. % Salaries eamed by einployees but not paidas of December 31 amount t $1,700, 9, Income lanes expense for the year is estimated at $56,000. OF this amount, $51,000 has been recognized as expense in prior months, and $39,006 has been paid to tax authorities. The come pany plans to pay the $17,000 remainder of its income tax liability on January 15. Instructions a. Prepare the necessary adjusting journal entries on Devembet 31, 201 b. Determine the amounts to be reported in the company’s year-end adjusted trial balance for ‘each of the following accounts: Consulting Fees Famed Dues and Subscriptions Expense Salaries Expense Depreciation Expense: Equipment Telephone Expense Miscellancous Expenses Rent Expense Interest Expense Supplies Expense Income Taxes Expense e. Dotermine the company’s net income far the year ended December 31, 2011, (Hint: Use the amounts determined in part b above.) Solution to the Demonstration Problem Dectner nt ete Pranic and Sibeogtons » ‘capes 190 Decomter pies adjustment 4 Deen Excanen:Eauerart 0 ‘cata Oeproten ule 00 Decent copreiaton aust (96,009 ~ 0Omos) Decent rest fuse. © Uneaes Consting Fe 250 Decmtar nsane evs adhe. Decor slant Treame Toe Fay. 5000 Decater icome tx epee auraaga eas pons ae ates pee arbor vialbane pie Acjvoonet ‘anew ‘Comino Fees Ene S957 180 (1S 750 8¥s000 ‘Sores Sere 6a820 13 1700 ‘Tacos Expse § 2550 Nine ent Capone 5 zz000 (is 230° ‘Stopes Expense $ te00 fis 1 Dose sn Sertons Eapense + m0 aso eprecaten Espen Eouomest 5 500 ais 600 ineres expense ene (3 so ireome Tas Expense —§ 51000, (91S S000 Voi he fgsessomput in pat yt iso eth yr i omput sfallms Coouting Fees Eaed Samra Eapense sonszo “Teaptooe Exsense 2580 ‘Suppie Expense 17% Dees a Subecetons predate ours 1200 es eager 10 Income Toes Epese 002 271000 187030Campus Theaw lj tsaccount evry mon Below sth company's il lance ‘hted Aurost 31,2011 Aldor information i provi Toe ne pepsin the comps ‘ining mes forthe tho ne (Boor nth ating ees he ee en Imad frihe fist even ments of 11, bur for Aust) Srnt PN ts og Tat USTED Ppa rea aan crams depen blr $ 14000 Feums and ogden x00 ‘Acute eprciton fies an egspmert 12000 Noes payaite 180000 near tian osene QMHEA) ‘000 tome ee payee 4740 Reine earings asst0 Saes gorse ca Fin wata epee 400 Lin expense 500 boome tes pent 2.000 Other Data ‘otis in paid lance : ae 2 The buling isbsng dessin oer prio 2 yeas 40 mort). 3 The ites nd cquipmest ar being dvd ree aperidf fe years (60 mont) 44 On me st ocean ma, meen uss tbe Lees al aac ne pre om oa tote opal At Aout scl nee para onthe aun oS. The hae allows thc YMCA orig che ening sneer can othe noes ala neckeay aloo fra fed oF 810 per om On June 28 the YMCA Made SLE advance pymunteoverg te ome of ey Aue, an Septet 6. The stanr ncses«poeantge af hs rns sama by Tass Corton, he concn soar pertingthesack hue Fr stack or sls n Suge Taste ones Camps heer 52250, pyle we Setter 10. No ery hsyetDe mae oe Tis vee (Crt Coneesnas Revere 1 Salas cae by employees. ut aac or dof Augist 31 anu oS 70.No fnty Rasy ber made to ect ns abit and expe Income tes expense for Aus estiated at $4,200 This amount wll be pi inthe Sepsis 15 alice ypeek te bettie is id Stn oI tery natal bss fs acounts mony. Ths theasmns shown wer lstaiteon lly 31,2011) 1. Unies Expense, 2. Depectios Expense [3 Accomsated Depeviton: Bing Asaue te tower ts een opestingproaby al year Alou the August 31 ea a (Adjusting Enures] 7a o | Fis ental Expense 15200 Prepad Film Rental 200 Fil rental espense incurred in August a | Depreciation Expense. Buildings 700 ‘Accumulated Depreciation: Guiding 70 ($168,000 = 240 months). a | Depreciation Expense: Fstures and 0 ‘Acconelsted Beprecistions Fitwiez 3 a0 rd Agee aepreciaon (155,000 * a A [terest Exper 500 Taierest expense acerued in August a HL | Uneained Admissions Revenue (ACA a0 ‘Admissions Revere aE Torecoid advance payment rom YMCA, gust (81500 » 12) o | Concessions Rewenve Reccivable Pa ‘Concession: Revenue. 2250. To revord avorued concessions revenue in a | Salavies Expense 700 Salanes PapBe 1700 @ 7 [ineome Tass Expense: 208 Income Tazes Payable 7700. To revoid income tases scored in AugustPROBLEM 4.44 CAMPUS THEATER (concluded) b. “@) Eight months (bills received January through August). Utilities bills are recorded as ‘monthly bills are received. As of August 31, eight monthly bills should have been received. “@) Seven months January through July). Depreciation expense is recorded only in ‘month-end adjusting entries. Thus, depreciation for August is not included in the August unadjusted trial balance. "@) Twenty months ($14,000/S700 per month). c. Corporations must pay income taxes in several instalments throughout the year. The balance in the Income Taxes Expense account represents the total amount of income taxes expense recognized since the beginning of the year. But Income Taxes Payable represents only the portion of this expense that has not yet been paid. In the example at hand, the $4,740 in income taxes payable probably represents only the income taxes ‘expense accrued in July, as Campus Theater should have paid taxes accrued in the first ‘two quarters by June 15.“eifeTemps ls enpoy emoloymzat poses for loa anes. Some snes: payin vance far sevice; ier ae billed ar eves haves pesfomodAdkanedpeymetsate ‘rae oan accu enived Unsam Fev. Adjusingsiesre perrmeson a mah ss ‘Raum anced Decor 1201 fons (Dearie in a ating ener Inve heay ben made forthe frst 11 months of 2011 but nor for Deere) Parse sy Prgms cee ‘Cash § 210% Pronidrent 0% ‘fe sppios oe Eaipment 008 ‘Acoumustos 22500 ‘coms pat, 3100 Innes oat 20 Uncarea fs one Ince espa ‘000 Uneamedroense 00 Retaet erin e000 Disones S00 Foes eae 75000 ‘Trarlegense 006 Insane eperse 2086 (fee npr perce 76 utes axpense. 06 Derecutor exenoeequpnent ‘500 ‘Solaies expense MoOther Osta ‘Acred bat nected es eae f Doce 3,211 amt 1.0. Records show that $2.50 fash recs cgally esorded urea fos had been ‘ned ifort 3 ‘Theconmpaty puchsseda sicmothiasranc pele on September 1201, S808 ‘OnDec 1,201, te emp pads en tong ebny 28,201, Off pene hal Dechert! $0. "peat ath ie ws 10 yeas e120 a), 7. On Aug | 261,he company oroned 312300 by serine asco, § pacer’ nse le The entre ote par sit month’ auc nee de om sey 13012 ‘Acie bt wiser sain at Deiter enc $2.70 stint incre at np forthe an yor tala S100 Tan es he quer 212. Instructors 1 Foreact ofthe numbered pagan, propre te mscesary ajsing ny (indudlng n else) ‘compas 011 incon state: Fas amd ‘Tavel Equa Insce epee fice Silos Enpone ap eeee Uitities Fane 7. Depesiaton Expense Fapment A. rest pene 9. Salar Exper 10, Isom Toes Expease The unjutod ial balance rpots dents ef $3008. As of Decor 3,201, have ‘how ede toe pil? Epi.