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Question: Fun Depot is a retail store that


Fun Depot is a retail store that sells toys, games, and bicycles. On December 31, 20X1, the firm’s general ledger contained the following accounts and balances.
INSTRUCTIONS
1. Prepare the Trial Balance section of a 10-column worksheet. The worksheet covers the year ended December 31, 20X1.
2. Enter the adjustments below in the Adjustments section of the worksheet. Identify each adjustment with the appropriate letter.
3. Complete the worksheet.
ACCOUNTS AND BALANCES
Cash $ 26,400 Dr.
Accounts Receivable 22,700 Dr.
Allowance for Doubtful Accounts 320 Cr.
Merchandise Inventory 138,000 Dr.
Supplies 11,600 Dr.
Prepaid Advertising 5,280 Dr.
Store Equipment 32,500 Dr.
Accumulated Depreciation—Store Equipment 5,760 Cr.
Office Equipment 8,400 Dr.
Accumulated Depreciation—Office Equipment 1,440 Cr.
Accounts Payable 8,600 Cr.
Social Security Tax Payable 5,920 Cr.
Medicare Tax Payable 1,368 Cr.
Federal Unemployment Tax Payable
State Unemployment Tax Payable
Salaries Payable
Janie Fielder, Capital 112,250 Cr.
Janie Fielder, Drawing 100,000 Dr.
Sales 1,043,662 Cr.
Sales Returns and Allowances 17,200 Dr.
Purchases 507,600 Dr.
Purchases Returns and Allowances 5,040 Cr.
Rent Expense 125,000 Dr.
Telephone Expense 4,280 Dr.
Salaries Expense 164,200 Dr.
Payroll Taxes Expense 15,200 Dr.
Income Summary
Supplies Expense
Advertising Expense 6,000 Dr.
Depreciation Expense—Store Equipment
Depreciation Expense—Office Equipment
Uncollectible Accounts Expense
ADJUSTMENTS
a.–b. Merchandise inventory on December 31 is $148,000.
c. During 20X1, the firm had net credit sales of $440,000. The firm estimates that 0.7 percent of these sales will result in uncollectible accounts.
d. On December 31, an inventory of the supplies showed that items costing $2,960 were on hand.
e. On September 1, 20X1, the firm signed a six-month advertising contract for $5,280 with a local newspaper and paid the full amount in advance.
f. On January 2, 20X0, the firm purchased store equipment for $32,500. At that time, the equipment was estimated to have a useful life of five years and a salvage value of $3,700.
g. On January 2, 20X0, the firm purchased office equipment for $8,400. At that time, the equipment was estimated to have a useful life of five years and a salvage value of $1,200.
h. On December 31, the firm owed salaries of $8,000 that will not be paid until 20X2.
i. On December 31, the firm owed the employer’s social security tax (assume 6.2 percent) and Medicare tax (assume 1.45 percent) on the entire $8,000 of accrued wages.
j. On December 31, the firm owed federal unemployment tax (assume 0.6 percent) and state unemployment tax (assume 5.4 percent) on the entire $8,000 of accrued wages.
Analyze: If the adjustment for advertising had not been recorded, what would the reported net income have been?


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