The Garvis Company uses an absorption-costing system based on standard costs. Variable manufacturing cost consists of direct material cost of $4.50 per unit and other variable manufacturing costs of$1.50 per unit. The standard production rate is 20 units per machine hour. Total budgeted and actual fixed manufacturing overhead costs are $840,000. Fixed manufacturing overhead is allocated at$14 per machine-hour based on fixed manufacturing costs of $840,000$\div$60,000 machine-hours, which is the level Garvis uses as its denominator level. The selling price is$10 per unit. Variable operating (nonmanufacturing) cost, which is driven by units sold, is $2 per unit. Fixed operating (nonmanufacturing) costs are$240,000. Beginning inventory in 2017 is 60,000 units; ending inventory is 80,000 units. Sales in 2017 are 1,080,000 units. The same standard unit costs persisted throughout 2016 and 2017. For simplicity, assume that there are no price, spending, or efficiency variances.

1. Prepare an income statement for 2017 assuming that the production-volume variance is written off at year-end as an adjustment to cost of goods sold.

2. The president has heard about variable costing. She ask you to recast the 2017 statement as it would appear under variable costing.

3. Explain the difference in operating income as calculated in requirements 1 and 2.

4. Graph how fixed manufacturing overhead is accounted for under absorption costing. That is, there will be two lines: one for the budgeted fixed manufacturing overhead (which is equal to the actual fixed manufacturing overhead in this case) and one for the fixed manufacturing overhead allocated. Show the production-volume variance in the graph.

5. Critics have claimed that a widely used accounting system has led to undesirable buildups of inventory levels.

(a) Is variable costing or absorption costing more likely to lead to such buildups? Why?

(b) What can managers do to counteract undesirable inventory buildups?

Hoffman Company manufactures car seats in its Boise plant. Each car seat passes through the assembly department and the testing department. This problem focuses on the assembly department. The process-costing system at Hoffman Company has a single direct-cost category (direct materials) and a single indirect-cost category (conversion costs). Direct materials are added at the beginning of the process. Conversion costs are added evenly during the process. When the assembly department finishes work on each car seat, it is immediately transferred to testing. Hoffman Company uses the weighted-average method of process costing. Data for the assembly department for October 2017 are as follows:

$$\begin{matrix} & \text{Physical Units (Car Seats)} & \text{Direct Materials} & \text{Conversion Costs}\\ \text{Work in process, October 1}{^a} & \text{4,000} & \text{\$1,248,000} & \text{\$241,650}\\ \text{Started during October 2017} & \text{22,500}\\ \text{Completed during October 2017} & \text{26,000}\\ \text{Work in process, October 31}{^b} & \text{500}\\ \text{Total costs added during October 2017} & \text{} & \text{\$4,635,000} & \text{\$2,575,125}\\ \end{matrix}$$

$^a$ Degree of completion: direct materials,?%; conversion costs, 45%.

$^b$ Degree of completion: direct materials,?%; conversion costs, 65%.

1. For each cost category, compute equivalent units in the assembly department. Show physical units in the first column of your schedule.

2. What issues should the manager focus on when reviewing the equivalent-unit calculations?

3. For each cost category, summarize total assembly department cost for October 2017 and calculate the cost per equivalent unit.

4. Assign costs to units completed and transferred out and to units in ending work in process.

Castleman Holdings, Inc. had the following equity investment portfolio at January 1, 2017.

$$\begin{array}{llr} \text{Evers Company}&\text{1,000 shares @ \$15 each}\hspace{25pt}&\text{\$\hspace{5pt}15,000}\hspace{4pt}\\ \text{Rogers Company}&\text{900 shares @ \$20 each}&\text{18,000}\hspace{4pt}\\ \text{Chance Company}&\text{500 shares @ \$9 each}&\underline{\text{\hspace{15pt}4,500}}\hspace{4pt}\\ \text{Equity investments @ cost}&&\text{37,500}\hspace{4pt}\\ \text{Fair value adjustment}&&\underline{\text{\hspace{15pt}(7,500}})\\ \text{Equity investments @ fair value}&&\underline{\underline{\$\text{\hspace{9pt}30,000}}}\hspace{4pt}\\ \end{array}$$

During 2017, the following transactions took place.

1. On March 1, Rogers Company paid a $2 per share dividend.
2. On April 30, Castleman Holdings, Inc. sold 300 shares of Chance Company for$11 per share.
3. On May 15, Castleman Holdings, Inc. purchased 100 more shares of Evers Company stock at $16 per share.
4. At December 31, 2017, the stocks had the following price per share values: Evers$17, Rogers $19, and Chance$8.

During 2018, the following transactions took place. 5. On February 1, Castleman Holdings, Inc. sold the remaining Chance shares for $8 per share. 6. On March 1, Rogers Company paid a$2 per share dividend. 7. On December 21, Evers Company declared a cash dividend of $3 per share to be paid in the next month. 8. At December 31, 2018, the stocks had the following price per share values: Evers$19 and Rogers $21.

Instructions

• a. Prepare journal entries for each of the above transactions.
• b. Prepare a partial balance sheet showing the investment-related amounts to be reported at December 31, 2017 and 2018.

The trial balance of Buse’s Fashion Center contained the accounts below at November 30, the end of the company’s fiscal year.

$$\begin{array}{c} \textbf{BUSE’S FASHION CENTER}\\ \textbf{Trial Balance}\\ \textbf{November 30, 2014}\\ \end{array}$$

$$\begin{array}{lcc} &\underline{\textbf{Debit}}&\underline{\textbf{Credit}}\\[3pt] \text{Cash}&\text{\$\hspace{7pt}37,700}\\ \text{Accounts Receivable}&\text{\hspace{12pt}33,700}\\ \text{Inventory}&\text{\hspace{12pt}43,000}\\ \text{Supplies}&\text{\hspace{17pt}8,800}\\ \text{Equipment}&\text{\hspace{7pt}143,000}\\ \text{Accumulated Depreciation—Equipment}&&\text{\$\hspace{7pt}41,000}\\ \text{Notes Payable}&&\text{\hspace{12pt}62,000}\\ \text{Accounts Payable}&&\text{\hspace{12pt}17,800}\\ \text{Common Stock}&&\text{\hspace{12pt}80,000}\\ \text{Retained Earnings}&&\text{\hspace{12pt}30,000}\\ \text{Dividends}&\text{\hspace{12pt}12,000}\\ \text{Sales Revenue}&&\text{\hspace{7pt}757,200}\\ \text{Sales Returns and Allowances}&\text{\hspace{17pt}6,200}\\ \text{Cost of Goods Sold}&\text{\hspace{7pt}505,400}\\ \text{Salaries and Wages Expense}&\text{\hspace{7pt}110,000}\\ \text{Advertising Expense}&\text{\hspace{12pt}26,400}\\ \text{Utilities Expense}&\text{\hspace{12pt}14,000}\\ \text{Maintenance and Repairs Expense}&\text{\hspace{12pt}12,100}\\ \text{Freight-Out}&\text{\hspace{12pt}11,700}\\ \text{Rent Expense}&\underline{\text{\hspace{12pt}24,000}}&\underline{\hspace{40pt}}\\ &\underline{\underline{\text{\$\hspace{1pt}}988,000}}&\underline{\underline{\text{\$\hspace{1pt}}988,000}}\\ \end{array}$$

Adjustment data:

 1. Store supplies on hand total $4,000.
 2. Depreciation is$14,000 on the store equipment and $6,000 on the delivery equipment.
 3. Interest of$4,400 is accrued on notes payable at November 30.
 4. Income tax due and unpaid at November 30 is $3,000.

Other data:$24,000 of notes payable are due for payment next year.

Instructions

(d) Prepare a multiple-step income statement and a retained earnings statement for the year, and a classified balance sheet at November 30, 2014.

The trial balance of Leopard Anvils at January 31, 2012, and the data for the month-end adjustments follow:

$$\begin{array}{c} \hline \text{LEOPARD ANVILS}\\ \text{Trial Balance}\\ \text{January 31, 2012}\\\hline \end{array}$$

$$\begin{array}{l|r|r} \hline \text { Account } &\text { Debit } & \text { Credit } \\ \hline \text { Cash } & \$ 4,400 & \\ \hline \text { Accounts receivable } & 14,800 & \\ \hline \text { Prepaid rent } & 2,300 & \\ \hline \text { Supplies } & 1,200 & \\ \text { Equipment } & 30,100 & \\ \text { Accumulated depreciation } & & \$ 4,600 \\ \text { Accounts payable } & & 7,500 \\ \hline \text { Salary payable } & & \\ \hline \text { Unearned service revenue } & & 4,900 \\ \hline \text { Leopard, capital } & & 25,700 \\ \hline \text { Leopard, drawing } & 4,800 & \\ \text { Service revenue } & & 17,400 \\ \hline \text { Salary expense } & 2,500 & \\ \hline \text { Rent expense } & & \\ \hline \text { Depreciation expense } & & \\ \hline \text { Supplies expense } & & \\ \hline \text{Total}&\$60,100&\$60,100\\\hline \end{array}$$

Adjustment data:

a. Unearned service revenue still unearned at January 31, $400. b. Prepaid rent still in force at January 31,$1,800. c. Supplies used during the month, $1,100. d. Depreciation for the month,$400. e. Accrued salary expense at January 31, $500.

Requirements

1. Prepare adjusting journal entries.
2. Enter the trial balance on a worksheet and complete the worksheet through the Adjusted Trial Balance of Leopard Anvils for the month ended January 31, 2012.
3. Prepare the income statement, the statement of owner’s equity, and the classified balance sheet in report form.
4. Using the worksheet data that you prepared, journalize and post the adjusting and closing entries to T-accounts. Use dates and show the ending balance of each account.
5. Prepare a post-closing trial balance.
6. Calculate the current and debt ratios for the company.

The following information was taken from the records of Daughtry Cosmetics, Inc., at December 31, 2016:

$$\begin{array}{lrlr} \text{Prior-period adjustment-net of taxes}&&\text{Interest expense}&\$21,000\\ \quad\text{debit to Retained Earnings}&\$4,000&\text{Gain on lawsuit settlement}&6,000\\ \text{Income tax expense (savings):}&&\text{Dividend revenue}&12,000\\ \quad\text{Continuing operations }&27,600&\text{Treasury stock, common}&\\ \quad\text{Income from discontinued}&&\quad\text{(1,000 shares at cost)}&16,000\\ \quad\text{operations}&4,800&\text{General expenses}&70,900\\ \text{Loss on sale of plant assets}&10,000&\text{Sales revenue}&536,000\\ \text{Income from discontinued}&&\text{Retained earnings, beginning, }&\\ \quad\text{operations}&10,000&\quad\text{as originally reported}&196,000\\ \text{Preferred stock, 6\\\%, \$25 par,}&&\text{Selling expenses}&81,000\\ \quad\text{4,000 shares issued }&40,000&\text{Common stock, no par,}&\\ \text{Cost of goods sold}&302,000&\quad\text{21,000 shares authorized}&\\ \text{Dividends declared on common stock}&28,000&\quad\text{and issued}&350,000\\ \end{array}$$

1. Using the End-of-Chapter Summary Problem as an example, prepare Daughtry Cosmetics’single-step income statement, which lists all revenues together and all expenses together, for the fiscal year ended December 31, 2016. Include earnings-per-share data. For purposes of earnings per share, assume dividends have been declared on preferred stock as of December 31.

2. Evaluate income for the year ended December 31, 2016. Daughtry’s top managers hoped to earn income from continuing operations equal to 7% of sales.

Kari Downs, an auditor with Wheeler CPAs, is performing a review of Depue Company’s inventory account. Depue did not have a good year, and top management is under pressure to boost reported income. According to its records, the inventory balance at yearend was $740,000. However, the following information was not considered when determining that amount.

1. Included in the company’s count were goods with a cost of$250,000 that the company is holding on consignment. The goods belong to Kroeger Corporation.

2. The physical count did not include goods purchased by Depue with a cost of $40,000 that were shipped FOB destination on December 28 and did not arrive at Depue warehouse until January 3.

3. Included in the inventory account was$14,000 of office supplies that were stored in the warehouse and were to be used by the company’s supervisors and managers during the coming year.

4. The company received an order on December 29 that was boxed and sitting on the loading dock awaiting pick-up on December 31. The shipper picked up the goods on January 1 and delivered them on January 6. The shipping terms were FOB shipping point. The goods had a selling price of $40,000 and a cost of$28,000. The goods were not included in the count because they were sitting on the dock.

5. On December 29, Depue shipped goods with a selling price of $80,000 and a cost of$60,000 to Macchia Sales Corporation FOB shipping point. The goods arrived on January 3. Macchia had only ordered goods with a selling price of $10,000 and a cost of$8,000. However, a sales manager at Depue had authorized the shipment and said that if Machia wanted to ship the goods back next week, it could.

6. Included in the count was $40,000 of goods that were parts for a machine that the company no longer made. Given the high-tech nature of Depue’s products, it was unlikely that these obsolete parts had any other use. However, management would prefer to keep them on the books at cost, “since that is what we paid for them, after all.”

Instruction

Prepare a schedule to determine the correct inventory amount. Provide explanations for each item above, saying why you did or did not make an adjustment for each item.

Zeidman Security Services Co. offers security services to business clients. Complete the following end-of-period spreadsheet (work sheet) for Zeidman Security Services Co.

$$\begin{array}{c} \textbf{Zeidman Security Services Co.}\\ \textbf{End-of-Period Spreadsheet (Work sheet)}\\ \textbf{For the Year Ended July 31,2012}\\ \end{array}$$

$$\begin{array}{lccc} \hline&\textbf{Adjusted}&\textbf{Income}&\textbf{Balance}\\ &\underline{\textbf{Trial Balance}}&\underline{\textbf{Adjustment}}&\underline{\textbf{Trial balance}}\\ \textbf{Account Title}&\textbf{Dr.}\quad\quad\quad\textbf{Cr.}&\textbf{Dr.}\quad\quad\quad\textbf{Cr.}&\textbf{Dr.}\quad\quad\quad\textbf{Cr.} \\ \hline\text{Cash}&12\quad\quad\quad\quad\quad\\ \text{Accounts Receivable}&89\quad\quad\quad\quad\quad\\ \text{Supplies}&3\quad\quad\quad\quad\quad\\ \text{Prepaid Insurance}&4\quad\quad\quad\quad\quad\\ \text{Land}&100\quad\quad\quad\quad\quad\\ \text{Equipment}&40\quad\quad\quad\quad\quad\\ \text{Accum. Depr.- Equipment}&8\\ \text{Accounts Payable}&36\\ \text{Wages Payable}&1\\ \text{Alex Zeidman, Capital}&170\\ \text{Alex Zeidman, Drawing}&8\quad\quad\quad\quad\quad\\ \text{Fees Earned}&99\\ \text{Wages Expense}&21\quad\quad\quad\quad\quad\\ \text{Rent Expense}&12\quad\quad\quad\quad\quad\\ \text{Insurance Expense}&8\quad\quad\quad\quad\quad\\ \text{Utilities Expense}&6\quad\quad\quad\quad\quad\\ \text{Supplies Expense}&5\quad\quad\quad\quad\quad\\ \text{Depreciation Expense}&4\quad\quad\quad\quad\quad\\ \text{Miscellaneous Expense}&2\quad\quad\quad\quad\quad\\ \hline &314\quad\quad\quad314\\ \hline\hline \text{Net income (loss)} \end{array}$$

prepare an income statement, statement of owner’s equity, and balance sheet for Zeidman Security Services Co.

Morgan Company’s balance sheet at December 31, 2016, is presented below.

$$\begin{array}{c} \textbf{MORGAN COMPANY}\\ \textbf{Balance Sheet}\\ \textbf{December 31, 2016}\\ \end{array}$$

$$\begin{array}{lrlr} \text { Cash } & \$ 30,000 & \text { Accounts Payable } & \$ 13,750 \\ \text { Inventory } & 30,750 & \text { Interest Payable } & 250 \\ \text { Prepaid Insurance } & 6,000 & \text { Notes Payable } & 50,000 \\ \text { Equipment } & \underline{~~~~38,000} & \text { Owner's Capital } & \underline{~~~40,750} \\ &\underline{\underline{\$ 104,750}} & & \underline{\underline{\$ 104,750}} \\ \end{array}$$

During January 2017, the following transactions occurred. (Morgan Company uses the perpetual inventory system.)

1. Morgan paid $\$ 250$ interest on the note payable on January 1, 2017. The note is due December 31, 2018.
2. Morgan purchased $\$ 261,100$ of inventory on account.
3. Morgan sold for $\$ 440,000$ cash, inventory which cost $\$ 265,000$. Morgan also collected $\$ 28,600$ in sales taxes.
4. Morgan paid $\$ 230,000$ in accounts payable.
5. Morgan paid $\$ 17,000$ in sales taxes to the state.
6. Paid other operating expenses of $\$ 30,000$.
7. On January 31, 2017, the payroll for the month consists of salaries and wages of $\$ 60,000$. All salaries and wages are subject to $7.65 \%$ FICA taxes. A total of $\$ 8,900$ federal income taxes are withheld. The salaries and wages are paid on February 1.

Adjustment data: 8. Interest expense of $\$ 250$ has been incurred on the notes payable. 9. The insurance for the year 2017 was prepaid on December 31, 2016. 10. The equipment was acquired on December 31, 2016, and will be depreciated on a straight-line basis over 5 years with a $\$ 2,000$ salvage value. 11. Employer's payroll taxes include $7.65 \%$ FICA taxes, a $5.4 \%$ state unemployment tax, and an $0.8 \%$ federal unemployment tax.

Instructions (You may need to set up T-accounts to determine ending balances.) (b) Prepare an adjusted trial balance at January 31, 2017.

Armstrong Chemical began operations in January. The company manufactures an acrylic car wax called Tough-Coat. The following standard cost estimates were developed several months before the company began operations, based on an estimated production of $1,000,000$ units (pints):

During the year, 1,000,000 pints of Tough-Coat were actually produced, of which 900,000 were sold. Actual costs incurred during the year were:

The company's inventories at the end of the year consisted of the following, with the Finished Goods inventory stated at standard cost:

The independent certified public accountant who has been engaged to audit the company's financial statements wants to adjust the valuation of Finished Goods inventory to "a revised standard cost" that would take into account the favorable price variance on material $\mathrm{X}-1(\$ 0.30$ per ounce) and the 10 percent wage increase early in the year. (An unfavorable quantity variance on material X-2 was caused by spoilage in production; the CPA feels no adjustment to the standard should be made for this type of item.)

The president of the company objects on the following grounds: "Such a revision is not necessary because the cost of material $\mathrm{X}-1$ already shows signs of going up and the wage increase was not warranted because the productivity of workers did not increase one bit. Furthermore, if we revise our inventory figure of $\$ 560,000$, our operating income will be reduced from the current level of $\$ 50,000$." You are called in by the president to help resolve the controversy.

Instructions

a. Do you agree with the president that revision of the $\$ 3.70$ standard cost figure is not necessary?

From inception of operations to December 31, 2012, Fortner Corporation provided for uncollectible accounts receivable under the allowance method: provisions were made monthly at 2% of credit sales; bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account; and no year-end adjustments to the allowance account were made. Fortner’s usual credit terms are net 30 days.

The balance in Allowance for Doubtful Accounts was $130,000 at January 1, 2012. During 2012, credit sales totaled$9,000,000, interim provisions for doubtful accounts were made at 2% of credit sales, $90,000 of bad debts were written off, and recoveries of accounts previously written off amounted to$15,000. Fortner installed a computer system in November 2012, and an aging of accounts receivable was prepared for the first time as of December 31, 2012. A summary of the aging is as follows.

$$\begin{array}{lrc} \textbf{Classification by Month of Sale} & \textbf{Balance in} & \textbf{Estimated \%}\\ & \textbf{Each Category} & \textbf{Uncollectible}\\ \\ \text{November–December 2012} & \$1,080,000 & 2\%\\ \text{July–October} & 650,000 & 10\%\\ \text{January–June} & 420,000 & 25\%\\ \text{Prior to 1/1/12} & \underline{150,000} & 80\%\\ & \underline{\underline{\$2,300,000}}\\ \end{array}$$

Based on the review of collectibility of the account balances in the “prior to 1/1/12” aging category, additional receivables totaling $60,000 were written off as of December 31, 2012. The 80% uncollectible estimate applies to the remaining$90,000 in the category. Effective with the year ended December 31, 2012, Fortner adopted a different method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable.

Instructions

(a) Prepare a schedule analyzing the changes in Allowance for Doubtful Accounts for the year ended December 31, 2012. Show supporting computations in good form. (Hint: In computing the 12/31/12 allowance, subtract the $60,000 write-off).

(b) Prepare the journal entry for the year-end adjustment to the Allowance for Doubtful Accounts balance as of December 31, 2012.

Aykroyd Corp. was a 30% owner of Martin Company, holding 210,000 shares of Martin's common stock on December 31, 2019. The investment account had the following entries.

$$\begin{array}{c} \hspace{90pt}\textbf{Investment in Martin}\\ \end{array}$$

$$\begin{array}{llrr|lllr} \hline \text{1/1/18 Cost}&&\text{}&\text{\$3,180,000}\hspace{10pt}&\text{12/6/18 Dividend received}&&\text{}&\text{\$150,000}\\ \text{12/31/18: Share of income}&&\text{}&\text{390,000}\hspace{10pt}&\text{12/5/19 Dividend received}&&\text{}&\text{240,000}\\ \text{12/31/19 Share of income}&&\text{}&\text{510,000}\hspace{10pt}&\text{}&&\text{}&\text{}\\ \end{array}$$

On January 2, 2020, Aykroyd sold 126,000 shares of Martin for $3,440,000, thereby losing its significant influence. During the year 2020, Martin experienced the following results of operations and paid the following dividends to Aykroyd.

$$\begin{array}{cccc} &{\hspace{5pt}\text{Martin}\hspace{5pt}}&{\hspace{2pt}\text{Dividends Paid}\hspace{2pt}}\\ &\underline{\hspace{10pt}\text{Income (Loss)}\hspace{10pt}}&\underline{\hspace{2pt}\text{to Aykroyd}\hspace{2pt}}\\ \text{2020}&\$300,000&\$50,400\\ \end{array}$$

At December 31, 2020, the fair value of Martin shares held by Aykroyd is $1,570,000. This is the first reporting date since the January 2 sale.

Instructions

a. What effect does the January 2, 2020, transaction have upon Aykroyd's accounting treatment for its investment in Martin?

b. Compute the carrying amount of the investment in Martin as of December 31, 2020 (prior to any fair value adjustment).

c. Prepare the adjusting entry on December 31, 2020, applying the fair value method to Aykroyd's long-term investment in Martin Company securities.

Castleman Holdings, Inc. had the following equity investment portfolio at January 1, 2020.

$$\begin{array} {lrrr} \text{Evers Company}\hspace{5pt} \ &\ \text{1,000 shares @ \$15 each}&\text{\$\hspace{5pt}15,000}\\ \text{Rogers Company}\hspace{5pt} \ &\ \text{900 shares @ \$20 each}&\text{18,000}\\ \text{Chance Company}\hspace{5pt}& \text{500 shares @ \$9 each}&\text{\underline{\hspace{14pt}{4,500}}}\\ \text{Equity investments @ cost}\hspace{5pt} \ &\ \text{}&\text{37,500}\\ \text{Fair value adjustment}\hspace{5pt}& &\text{\underline{\hspace{8pt}{(7,500)}}}\\ \text{Equity investments@fair value}\hspace{5pt}& &\underline{\underline{\$\hspace{5pt}\text{30,000}}}\\\\ \end{array}$$

During 2020, the following transactions took place.

1. On March 1. Rogers Company paid a $2 per share dividend.

2. On April 30, Castleman Holdings, Inc. sold 300 shares of Chance Company for$11 per share.

3. On May 15, Castleman Holdings, Inc. purchased 100 more shares of Evers Company stock at $16 per share.

4. At December 31, 2020, the stocks had the following price per share values: Evers$17, Rogers $19, and Chance$8.

During 2021, the following transactions took place.

5. On February 1, Castleman Holdings, Inc. sold the remaining Chance shares for $8 per share.

6. On March 1, Rogers Company paid a$2 per share dividend.

7. On December 21, Evers Company declared a cash dividend of $3 per share to be paid in the next month.

8. At December 31, 2021, the stocks had the following price per share values: Evers$19 and Rogers $21.

Instructions

a. Prepare journal entries for each of the above transactions.

b. Prepare a partial balance sheet showing the investment-related amounts to be reported at December 31, 2020 and 2021.

The unadjusted trial balance of Watson Anvils at December 31, 2018, and the data for the adjustments follow:

$$\begin{array}{c} \textbf{WATSON ANVILS}\\ \textbf{Unadjusted Trial Balance}\\ \textbf{December 31, 2018} \end{array}$$

$$\begin{array}{lrr} {\textbf{Account Title}}&\textbf{Debit\hspace{6pt}}&\textbf{Credit\hspace{4pt}}\\ \text{Cash}&\text{\$\hspace{5pt}13,560}\\ \text{Accounts Receivable}\hspace{10pt}&\text{17,000}\\ \text{Prepaid Rent}&\text{2,140}\\ \text{Office Supplies}&\text{2,800}\\ \text{Equipment}&\text{30,000}\\ \text{Accumulated Depreciation-Equipment}&&\text{\$\hspace{5pt}11,000}\\ \text{Accounts Payable}&&\text{7,200}\\ \text{Salaries Payable}&&\text{}\\ \text{Unearned Revenue}&&\text{5,600}\\ \text{Common Stock}&&\text{12,000}\\ \text{Retained Earnings}&&\text{17,600}\\ \text{Dividends}&\text{4,600}\\ \text{Service Revenue}&&\text{19,000}\\ \text{Salaries Expense}&\text{2,300}\\ \text{Rent Expense}&\text{}\\ \text{Depreciation Expense-Equipment}&\text{}\\ \text{Supplies Expense }&\text{\underline{\hspace{38pt}}}&\text{\underline{\hspace{38pt}}}\\ \text{Total}&\underline{\underline{\$\hspace{5pt}\text{72,400}}}&\underline{\underline{\$\hspace{5pt}\text{72,400}}}\\ \end{array}$$

Adjustment data: a. Unearned Revenue still unearned at December 31, $3,600. b. Prepaid Rent still in force at December 31,$2,000. c. Office Supplies used, $600. d. Depreciation,$400. e. Accrued Salaries Expense at December 31, $180.

Requirements

1. Open the T-accounts using the balances in the unadjusted trial balance.
2. Complete the worksheet for the year ended December 31, 2018 (optional).
3. Prepare the adjusting entries, and post to the accounts.
4. Prepare an adjusted trial balance.
5. Prepare the income statement, the statement of retained earnings, and the classified balance sheet in report form.
6. Prepare the closing entries, and post to the accounts.
7. Prepare a post-closing trial balance.
8. Calculate the current ratio for the company.