Question

Swifty Design was founded by Thomas Grant in January 2011. Presented below is the adjusted trial balance as of December 31, 2020.
SWIFTY DESIGN
ADJUSTED TRIAL BALANCE
DECEMBER 31, 2020
Debit Credit
Cash $11,210
Accounts Receivable 21,710
Supplies 5,210
Prepaid Insurance 2,710
Equipment 60,210
Accumulated Depreciation-Equipment $35,210
Accounts Payable 5,210
Interest Payable 168
Notes Payable 5,600
Unearned Service Revenue 5,810
Salaries and Wages Payable 1,416
Common Stock 10,210
Retained Earnings 3,710
Service Revenue 61,710
Salaries and Wages Expense 11,510
Insurance Expense 966
Interest Expense 518
Depreciation Expense 7,600
Supplies Expenses 3,400
Rent Expense 4,000
1) Prepare an income statement for the year ending December 31, 2020, Statement of Retained Earnings, Balance Sheet and
2) If the note has been outstanding 6 months, what is the annual interest rate on that note?
3) If the company paid $17,500 in salaries and wages in 2014, what was the balance in Salaries and Wages Payable on December 31, 2013?

Answer 1

Answer:

Swifty Design

1. Income Statement for the year ended December 31, 2020:

Service Revenue                                              $61,710

Salaries and Wages Expense    11,510

Insurance Expense                       966

Interest Expense                           518

Depreciation Expense               7,600

Supplies Expenses                    3,400

Rent Expense                            4,000          $27,994

Net income                                                     $33,716

b) Statement of Retained Earnings for the year ended December 31, 2020:

Retained Earnings, January 1, 2020            $3,710

Net income                                                    33,716

Retained Earnings, December 31, 2020  $37,426

c) Balance Sheet as of December 31, 2020:

Assets

Current assets:

Cash                                            $11,210

Accounts Receivable                   21,710

Supplies                                        5,210

Prepaid Insurance                        2,710

Total current assets                                 $40,840

Long-term assets:

Equipment                                 60,210

Accumulated depreciation       35,210  $25,000

Total assets                                            $65,840

Liabilities + Equity:

Liabilities:

Accounts Payable                                    $5,210

Interest Payable                                            168

Notes Payable                                          5,600

Unearned Service Revenue                     5,810

Salaries and Wages Payable                     1,416

Total liabilities                                      $18,204

Equity:

Common Stock                    $10,210

Retained Earnings                37,426  $47,636

Total liabilities + equity                      $65,840

2. The annual interest would be $518 according to accrual basis of accounting.

3. If the company paid $17,500 in salaries and wages in 2014 (2020), the balance in Salaries and Wages Payable on December 31, 2013(2019) was $7,406.

Explanation:

SWIFTY DESIGN

ADJUSTED TRIAL BALANCE

DECEMBER 31, 2020

                                                       Debit            Credit

Cash                                            $11,210

Accounts Receivable                   21,710

Supplies                                        5,210

Prepaid Insurance                        2,710

Equipment                                 60,210

Accumulated Depreciation-Equipment           $35,210

Accounts Payable                                                 5,210

Interest Payable                                                       168

Notes Payable                                                     5,600

Unearned Service Revenue                                5,810

Salaries and Wages Payable                                1,416

Common Stock                                                  10,210

Retained Earnings                                               3,710

Service Revenue                                                61,710

Salaries and Wages Expense    11,510

Insurance Expense                       966

Interest Expense                           518

Depreciation Expense               7,600

Supplies Expenses                    3,400

Rent Expense                            4,000

Totals                                   $129,044        $129,044

Salaries and Wages:

Wages payable, 12/31/2019 $7,406

Salaries expense                    11,510

Cash paid in 2020                17,500

Wages Payable, 12/31/2020 $1,416