Prepare the monthly income statement, the statement of retained earnings, and the classified balance…

(Learning Objective 3, 4, 6: Preparing an adjusted trial balance and the financial statements; using the current ratio to evaluate the business) Consider the unadjusted trial balance of Omega Advertising, Inc., at October 31, 20X2, and the related month-end adjustment data.

Omega Advertising, Inc. Trial Balance October 31, 20X2

Cash

$16,300

Accounts receivable

7,000

Prepaid rent

4,000

Supplies

600

Furniture

36,000

Accumulated depreciation

$ 3,000

Accounts payable

8,800

Salary payable

Common stock

15,000

Retained earnings (September 30, 20X2)

21,000

Dividends

4,600

Advertising revenue

25,400

Salary expense

4,400

Rent expense

Utilities expense

300

Depreciation expense

Supplies expense

Total

$73,200

$73,200

Adjustment data:

a. Accrued advertising revenue at October 31, $2,900.

b. Prepaid rent expired during the month. The unadjusted prepaid balance of $4,000 relates to the period October 20X2 through January 20X3.

c. Supplies used during October, $200.

d. Depreciation on furniture for the month. The furniture’s expected useful life is 5 years.

e. Accrued salary expense at October 31 for Monday through Thursday; the 5-day weekly payroll is $2,000.

Required

1. Using Exhibit 3-9, page 145, as an example, prepare the adjusted trial balance of Omega Advertising at October 31, 20X2. Key each adjusting entry by letter.

2. Prepare the monthly income statement, the statement of retained earnings, and the classified balance sheet. Draw arrows linking the three financial statements.

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