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