Decision Case F:3-1
One year ago, Tyler Stasney founded Swit Classified Ads. Stasney remembers
that you took an accounting course while in college and comes to you for
advice. He wishes to know how much net income his business earned during
the past year in order to decide whether to keep the company going. His
accounting records consist of the T-accounts from his ledger, which were
prepared by an accountant who moved to another city. The ledger at December
31 follows. The accounts have not been adjusted.
Cash Accounts Payable Common Stock Salaries Expense
Dec.31 5,800
21,500 Dec. 31
20,000 Dec. 31
Dec. 31 17,000
Depreciation
Accounts Receivable Unearned Revenue Dividends Expense—Equipment
Dec. 31 12,000 4,000 Dec. 31 Dec. 31 28,000
Prepaid Rent Salaries Payable Service Revenue Rent Expense
Jan.2 2,800
Office Supplies
Jan.2 2,600
Equipment
Jan.2 36,000
Accumulated
Depreciatio
Equipment
59,500 Dec. 31
Utilities Expense
Dec XXXXXXXXXX
Supplies
Expense Cash Accounts Payable Common Stock Salaries Expense
Dec. 31 5,800 21,500 Dec. 31 20,000 Dec.31 Dec. 31 17,000
Depreciation
Accounts Receivable Unearned Revenue Dividends Expense—Equipment
Dec. 31 12,000 4,000 Dec. 31 Dec. 31 28,000
Prepaid Rent Salaries Payable Service Revenue Rent Expense
Jan.2 2,800 59,500 Dec. 31
Office Supplies Utilities Expense
Jan. 2 2,600 Dec XXXXXXXXXX
Equipment Supplies Expense
Jan.2 36,000
Accumulated
Depreciation—Equipment
Stasney indicates that at year-end, customers owe the business $1,600 for
accrued service revenue. These revenues have not been recorded. During the
year, Swift Classified Ads collected $4,000 service revenue in advance from
customers, but the business earned only $900 of that amount. Rent expense for
the year was $2,400, and the business used up $1,700 of the supplies. Swift
determines that depreciation on its equipment was $5,000 for the year. At
December 31, the business owes an employee $1,200 accrued salary