Question

Exercise 3-12 Oriole Design was founded by Thomas Grant in January 2011. Presented below is the adjusted trial balance as of December 31, 2017. ORIOLE DESIGN ADJUSTED TRIAL BALANCE DECEMBER 31, 2017 Debit Credit Cash $11,155 Accounts Receivable 21,655 Supplies 5,155 Prepaid Insurance 2,655 Equipment 60,155 Accumulated Depreciation-Equipment $35,155 Accounts Payable 5,155 Interest Payable 162 Notes Payable 5,400 Unearned Service Revenue 5,755 Salaries and Wages Payable 1,408 Common Stock 10,155 Retained Earnings 3,655 Service Revenue 61,655 Salaries and Wages Expense 11,455 Insurance Expense 958 Interest Expense 162 Depreciation Expense 7,400 Supplies Expenses 3,400 Rent Expense 4,350 $128,500 $128,500 Prepare an income statement for the year ending December 31, 2017. (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) ORIOLE DESIGN Income Statement $ $ $ SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Prepare a statement of retained earnings for the year ending December 31, 2017. (List items that increase retained earnings first.) ORIOLE DESIGN Statement of Retained Earnings $ : $ SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Prepare an unclassified balance sheet at December 31. (List assets in order of liquidity.) ORIOLE DESIGN Balance Sheet Assets $ $ : $ Liabilities and Stockholders' Equity $ $ $ SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Answer the following questions. (Round interest rate to 0 decimal places, e.g. 5%.) (1) If the note has been outstanding 6 months, what is the annual interest rate on that note? (Hint: Assume that the amount of interest payable in the trial balance relates to the note payable in the trial balance.) The annual interest rate % (2) If the company paid $17,500 in salaries and wages in 2017, what was the balance in Salaries and Wages Payable on December 31, 2016? The balance in Salaries and Wages Payable $

Answer 1

Answer:

Oriole Design as the following Key results, explanation and workings have been shown below:

A

• Net Profit $33,930
• Closing retained Earnings $37,585
• Net Assets $47,740
• Shareholders Equity $47,740

B Interest rate on Notes Payable is 1.5%

C. Total Wages and Salaries Payable as at Dec 31 2016 = $7,453

Explanation:

Oriole Design

Income Statement

For the Year ending December 31 2017

Revenue $61,655

Expenses

Salaries & Wages $11,455

Insurance Expense $958

Interest Expense $162

Depreciation Expense $7,400

Supplies Expense $3,400

Rent Expense $4,350

Total Expenses = $27,725

Net Profit = $33,930

Oriole Design

Statement of Retained Earnings

For the Year Ending December 31 2017

Opening Balance $3,655

Add Net Profit $33,930

Closing Retained Earnings = $37,585

Oriole Design

Balance Sheet

As at December 31st 2017

Assets

Cash $11,155

Accounts Receivable $21,655

Supplies $5,155

Prepaid Insurance $2,655

Equipment $60,155

Less Accumulated Depreciation on Equipment -$35,155

Total Assets = $65620

Liabilities

Account Payable $5,155

Interest Payable $162

Notes Payable $5,400

Unearned Service Revenue $5,755

Salaries & Wages Payable $1,408

Total Liabilities = $17,880

Net Assets = $47,740

Shareholder's Equity

Common Stock $10,155

Closing Retained Earnings $37,585

Total Shareholder's Fund = $47,740

B. Notes Payable = $5,400

Interest Payable = $162

Duration of Notes as at December 31 2017 = 6months

Interest Rate = 162/5400 x 6/12 x 100%

=1.5%

C.

Salaries and Wages Payable Closing Dec 31 2017 = $1,408

Salaries and Wages expensed in 2017 = $11,455

Salaries and Wages Paid in Cash in 2017 = $17,500

Payment relating to Previous Year balance = $17,500 - $11,455 = $6,045

Payment outstanding from last year not yet cleared $1,408

Total Wages and Salaries Payable as at Dec 31 2016 = $6,045 + $1,408 = $7,453