Demonstration Problem

Chapter 3
The Demonstration Problem below includes an Action Plan. Once you've completed the problem, you can
compare to the Solution, also available below.

Problem 1
Gariepy Industries collected $108,000 from customers in 2024. Of the amount collected, $25,000 was for services
performed in 2023. In addition, Gariepy performed services worth $36,000 in 2024 that will not be collected until
2025.

Gariepy Industries also paid $72,000 for expenses in 2024. Of the amount paid, $30,000 was for expenses
incurred on account in 2023. In addition, Gariepy incurred $42,000 of expenses in 2024 that will not be paid until
2025.

Instructions
A. What is the difference between accrual basis accounting and cash basis accounting? Which method is in
accordance with generally accepted accounting principles?
B. Compute the 2024 cash basis profit.
C. Compute the 2024 accrual basis profit.
D. Why is the accrual basis profit more useful than the cash basis profit?

Action Plan

Review the concept of accrual versus cash basis accounting.

Next: View the Solution ([Link])

Demonstration Problem

Chapter 3

Problem 1: Solution
A.

Accrual basis accounting means that the company records business transactions in the period when they occur,
and not when the cash is received or paid. For example, a lawncare company records revenues when the
lawncare service is provided. The company may not receive the payment for this service until the following month.
The lawncare company may rent special equipment to provide spring cleanup for their clients. They would record
the cost of this rental in the month the equipment is used, even though they may not pay the rental invoice until
the following month.

Cash basis accounting means that the company records all business transactions as the cash is received or paid.
Revenues are recorded in the month when the cash is received. Expenses are recorded in the month when the
cash is paid out.

Creation of financial statements using the accrual basis accounting is the method required by generally accepted
accounting principles. This method is a bit more complex but it provides more useful information for decision
making.

B.

Cash received from revenue $108,000

Cash paid for expenses (72,000)

Cash basis profit $ 36,000

(Cash collected from customers in 2024 − Cash paid out for expenses in 2024 = Cash basis profit for 2024)

C.

Revenues [($108,000 − $25,000) + $36,000] $119,000

Expenses [($72,000 − $30,000) + $42,000] (84,000)

Accrual basis profit $ 35,000

[((Cash collected in 2024 − Cash related to 2023 services) + Services performed in 2024 but not collected until
2025) − ((Cash paid out for expenses in 2024 − Expenses incurred in 2023) + 2024 expenses incurred but not paid
until 2025) = Accrual basis profit]

D.
Profit calculated based on accrual accounting is more useful than profit calculated on a cash basis because it
reveals relationships that are likely going to be important in predicting future results. Things like trends in revenues
and expenses are shown more clearly and are more meaningful.

Back: Problem 1 ([Link])

Demonstration Problem

Chapter 3
The Demonstration Problem below includes an Action Plan and electronic Working Papers (in Excel). Download
the Working Papers and complete the problem, using the Action Plan (be sure to save your work). Once you've
completed the problem, you can compare to the Solution, also available below.

Problem 2
Sharma Advertising is owned by Rashi Sharma and began operations on November 1, 2023. The company has an
October 31 fiscal year end and prepares adjustments on an annual basis. The following is a listing of all its
accounts at October 31, 2024, before adjustments. All accounts have normal balances.

Sharma Advertising
Trial Balance
October 31, 2024

Debit Credit

Cash $15,200

Accounts receivable 2,400

Supplies 2,500

Prepaid insurance 600

Prepaid rent 2,250

Equipment 6,200

Furniture 3,400

Accounts payable $2,500

Unearned revenue 3,600

Notes payable 8,400

R. Sharma, capital 10,000

R. Sharma, drawings 500

Service revenue 41,200

Salaries expense 24,400

Rent expense 8,250

$65,700 $65,700
Additional information:
1. The landlord for the property Sharma rents required a three-month rent prepayment of $2,250 on
September 1, 2024.
2. The equipment has a 4-year useful life.
3. The furniture has an 8-year useful life.
4. A physical count of the supplies shows there was $850 on hand at October 31.
5. An analysis of the unearned revenue account shows that $1,350 remains unearned at October 31.
6. Sharma purchased a one-year insurance policy on March 1, 2024 for $600. The policy came into effect on
this date.

Instructions
A. Prepare the adjusting entries at October 31.
B. What is the purpose of recording depreciation?

Action Plan

Prepare separate journal entries for each adjusting entry. Make sure debits equal credits.
Note that adjustments are being made based on an annual basis.
Each adjusting entry should affect one income statement account and one balance sheet account.
Look at how the amounts are currently recorded in the accounts before trying to determine what
adjustments are necessary.
Select account titles carefully. Use existing titles whenever possible.
Review the concept of depreciation and describe it.

Download the Working Papers (Excel Spreadsheet) (ch03_d2_worksheet_RM.xlsx)

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Demonstration Problem

Chapter 3

Problem 2: Solution
A.

J1

Oct. 31 Rent Expense 1,500

Prepaid Rent 1,500

$2,250 ÷ 3 months × 2 months = $1,500

31 Depreciation Expense 1,550

Accumulated Depreciation—Equipment 1,550

$6,200 ÷ 4 = $1,550

31 Depreciation Expense 425

Accumulated Depreciation—Furniture 425

$3,400 ÷ 8 = $425

31 Supplies Expense 1,650

Supplies 1,650

$2,500 − $850 = $1,650

31 Unearned Revenue 2,250

Service Revenue 2,250

$3,600 − $1,350 = $2,250

31 Insurance Expense 400

Prepaid Insurance 400

$600 ÷ 12 months × 8 months = $400

B.

Depreciation allocates the cost of an asset over the useful life of the asset. It is not a process to value the asset
but to record the cost relating to acquiring and using a long-term asset over time.
Back: Problem 2 ([Link])
Demonstration Problem

Chapter 3
The Demonstration Problem below includes an Action Plan and electronic Working Papers (in Excel). Download
the Working Papers and complete the problem, using the Action Plan (be sure to save your work). Once you've
completed the problem, you can compare to the Solution, also available below.

Problem 3
Best First Aid offers first aid training to individuals and groups across the city. The following information is
available to be used in recording annual adjusting entries for the company’s October 31, 2024, year end:

Instructions
a. On October 31, 2023, the company had a balance of $800 in its supplies account. Additional supplies were
purchased during the fiscal year totalling $2,500 and were recorded to supplies. The supplies inventory on
October 31, 2024, amounts to $980.
b. On July 1, 2024, Best First Aid borrowed $28,000 and signed a nine-month, 6% note payable. Interest and
principal are payable at maturity.
c. Best First Aid purchased equipment on November 1, 2022, for $9,000. The equipment was estimated to
have a useful life of six years.
d. On October 1, 2024, Best First Aid moved to new offices. Rent is $800 per month. Best First Aid paid the
first three months’ rent that day and recorded the payment as prepaid rent.
e. Best First Aid requires a $200 deposit from clients as an advance payment for first aid training courses
when they are booked. As at October 31, 2024, Best First Aid has deposits for 15 training courses recorded
as unearned revenue. A review of the company’s records shows that the company has provided all but five
of the 15 training courses.
f. In early November, Best First Aid received an invoice for $360 from BellTel for October telephone charges.
The amount has not yet been recorded or paid.
g. On October 28, 2024, Best First Aid provided a first aid training course to MRC employees. Best First Aid
was too busy to invoice MRC that day. Instead, it prepared the $1,550 invoice on November 2, 2024. MRC
agreed to pay this amount on November 15, 2024.
h. Best First Air pays it employees a total of $3,000 every second Wednesday. Employees work a five-day
work week, Monday to Friday. October 31, 2024 is a Thursday. Employees were paid on Wednesday
October 30, 2024, up to the Friday of the prior week.

Action Plan

Calculate any unadjusted balances from the information that is given.

Where an unadjusted balance was calculated, arrive at the adjusted balance.
Prepare any accrual or deferral adjusting entries.
Make sure you consider the account that was used in the original transaction.
Download the Working Papers (Excel Spreadsheet) (ch03_d3_worksheet_RM.xlsx)

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Demonstration Problem

Chapter 3

Problem 3: Solution
J1

(a) Oct. 31 Supplies Expense 2,320

Supplies 2,320
($800 + $2,500 - $980)

(b) 31 Interest Expense 560

Interest Payable 560

($28,000 X 6% X 4/12)

(c) 31 Depreciation Expense 1,500

Accumulated Depreciation – Equipment 1,500

($9,000 ÷ 6)

(d) 31 Rent Expense 800

Prepaid Rent 800

(e) 31 Unearned Revenue 2,000

Service Revenue 2,000

($200 x 10)

(f) 31 Telephone Expense 360

Accounts Payable 360

(g) 31 Accounts Receivable 1,550

Service Revenue 1,550

(h) 31 Salaries Expense 1,200

Salaries Payable 1,200

($3,000 ÷ 2 x 4/5)

Back: Problem 3 ([Link])

Demonstration Problem

Chapter 3
The Demonstration Problem below includes an Action Plan and electronic Working Papers (in Excel). Download
the Working Papers and complete the problem, using the Action Plan (be sure to save your work). Once you've
completed the problem, you can compare to the Solution, also available below.

Problem 4
Ricardo Hernandez, D.D.S., opened a dental practice on January 1, 2024. During the first month of operations,
the following transactions occurred requiring adjusting entries. Ricardo's bookkeeper prepares adjusting entries
monthly.

1. Performed services for patients with various dental needs. At January 31, $785 of such services were
performed but not yet recorded or paid for.
2. At the end of January, Hernandez called the local utility company to determine the cost of the utilities
outstanding. As at January 31, $450 is owing and unpaid. These costs will be due on February 12.
3. Purchased a dental chair for $125,000, paying $20,000 in cash and signing a $105,000 three-year note
payable for the balance. The note payable has a 6% interest rate and monthly interest payments are due on
the first day of the following month.
4. An independent lab creates dental appliances based on moulds. Hernandez has not yet received an invoice
but the quote for the work already completed was $3,170 for lab fees in January. (Hint: Use Lab Fee
Expense)
5. Unpaid janitorial service costs were $230.
6. The dental assistant and the receptionist are paid each Monday. The weekly payroll is $2,000. Salaries were
last paid on Monday, January 29, which provided payment up to and including January 29. Salaries are still
owing for Tuesday, January 30 and Wednesday, January 31.
7. Hernandez had an empty business office in his dental clinic that he rented out to a business consultant for
$300/month. The lease was signed on January 16, the date the tenant took occupancy, and the tenant
promised to pay the January amount outstanding on February 1.

Instructions
A. Prepare the adjusting entries at December 31.
B. Explain two generally accepted accounting principles that relate to adjusting the accounts.

Action Plan

Prepare separate journal entries for each adjusting entry. Make sure debits equal credits.
Note that adjustments are being made based on a monthly basis.
Each adjusting entry should affect one income statement account and one balance sheet account.
Look at how the amounts are currently recorded in the accounts before trying to determine what
adjustments are necessary.
Select account titles carefully. Use existing titles whenever possible.
Review the revenue and expense recognition policies and determine why accrual adjusting entries
need to be performed.

Download the Working Papers (Excel Spreadsheet) (ch03_d4_worksheet_RM.xlsx)

Next: View the Solution ([Link])

Demonstration Problem

Chapter 3

Problem 4: Solution
A.

J1

Jan 31 Accounts Receivable 785

Service Revenue 785

31 Utilities Expense 450

Accounts Payable 450

31 Interest Expense 525

Interest Payable 525

$105,000 × .06 ÷ 12 months = $525/month

31 Lab Fee Expense 3,170

Accounts Payable 3,170

31 Janitorial Expense 230

Accounts Payable 230

31 Salaries Expense 800

Salaries Payable 800

$2,000 ÷ 5 days × 2 days outstanding = $800

31 Accounts Receivable 150

Rent Revenue 150

$300 × ½ month = $150

B.

Revenue recognition principle – revenue should be recognized based on the accrual basis of accounting. This
means that revenue is recorded when the service has been performed or the goods sold and delivered, regardless
of when cash is collected. Depending on whether the company follows ASPE or IFRS, there are a few other
requirements. Under ASPE, performance is to be substantially completed, can be measured reliably, and the
company is reasonably certain that they will be able to collect the money owing. Under IFRS, there is a five-step
process relating to the company completing the performance obligation.

Expense recognition principle – when goods or services are used or consumed, these costs should be recorded
based on the accrual basis of accounting. This means that expenses are recorded when the costs are incurred
and not when the company pays for the goods or services.

The matching principle brings the revenue recognition and expense recognition together. The company should
attempt to match revenues and costs in the same period if possible.

Back: Problem 4 ([Link])

Demonstration Problem

Chapter 3
The Demonstration Problem below includes an Action Plan and electronic Working Papers (in Excel). Download
the Working Papers and complete the problem, using the Action Plan (be sure to save your work). Once you've
completed the problem, you can compare to the Solution, also available below.

Problem 5
Thind Developments opened for business on May 1, 2023, with eight cottage units. Its trial balance before
adjustments on October 31, 2024 is as follows:

THIND DEVELOPMENTS
Trial Balance
October 31, 2024

Debit Credit

Cash $ 31,400

Prepaid insurance 6,400

Supplies 3,900

Land 45,000

Cottages 180,000

Accumulated depreciation—cottages $ 4,500

Furniture 36,000

Accumulated depreciation—furniture 1,800

Accounts payable 5,200

Unearned revenue 7,500

Mortgage payable 90,000

C. Thind, capital 156,300

C. Thind, drawings 6,000

Service revenue 140,000

Repairs expense 1,900

Salaries expense 85,000

Utilities expense 9,700

 THIND DEVELOPMENTS
Trial Balance
October 31, 2024

Debit Credit

$405,300 $405,300

Other Data:
1. Insurance expires at the rate of $400 per month.
2. A count of supplies on October 31 shows $800 of supplies on hand.
3. The cottages were estimated to have a useful life of 20 years and the furniture was expected to have a
useful life of 10 years.
4. Unearned revenue of $6,000 was provided to tenants prior to October 31.
5. Salaries of $750 were unpaid at October 31.
6. Utilities of $425 were unpaid at October 31.
7. On October 31, Thind Developments determined it is owed $1,200 from tenants.
8. The mortgage interest rate is 6% per year. Interest is paid semi annually on November 1 and May 1. The
mortgage was taken out on May 1, 2024.
9. During the year the owner, Courtney Thind, invested $20,000 cash in the business.

Instructions
A. Prepare the adjusting entries at October 31 for the year ended October 31.
B. Post the adjusting entries to the ledger accounts. (Use J1 as the posting reference.)
C. Prepare an adjusted trial balance at October 31.
D. Prepare an income statement and a statement of owner's equity for the year ended October 31, and a
balance sheet as at October 31, 2024.

Action Plan

Prepare separate journal entries for each adjusting entry. Make sure debits equal credits.
Each adjusting entry should affect one income statement account and one balance sheet account.
Arrange the ledger in statement order, beginning with the balance sheet accounts.
The trial balance lists accounts in the order in which they appear in the ledger.
Prepare the income statement first; revenues are listed first then expenses.
Determine the ending balance in owner's capital by adding owner investments and profit to the
owner's capital account and subtracting drawings.
To prepare the balance sheet, assets must equal liabilities plus owner's equity.

Download the Working Papers (Excel Spreadsheet) (ch03_d5_worksheet_RM.xlsx)

Next: View the Solution ([Link])
Demonstration Problem

Chapter 3

Problem 5: Solution
A.

GENERAL JOURNAL J1

Date Account Title Debit Credit

1. Oct. 31 Insurance Expense 4,800

Prepaid Expense 4,800

$400 × 12 = $4,800

2. 31 Supplies Expense 3,100

Supplies 3,100

$3,900 − $800 = $3,100

3. 31 Depreciation Expense—Cottages 9,000

Accumulated Depreciation—Cottages 9,000

$180,000 ÷ 20 = $9,000

31 Depreciation Expense—Furniture 3,600

Accumulated Depreciation—Furniture 3,600

$36,000 ÷ 10 = $3,600

4. 31 Unearned Revenue 6,000

Service Revenue 6,000

5. 31 Salaries Expense 750

Salaries Payable 750

6. 31 Utilities Expense 425

Accounts Payable 425

7. 31 Accounts Receivable 1,200

Service Revenue 1,200

8. 31 Interest Expense 2,700

GENERAL JOURNAL J1

Interest Payable 2,700

($90,000 × 6%) × 6/12 months = $2,700

B.

Cash

Date Explanation Ref. Debit Credit Balance

Oct. 1 Balance  31,400

Accounts Receivable

Date Explanation Ref. Debit Credit Balance

Oct. 1  1,200 1,200

Prepaid Insurance

Date Explanation Ref. Debit Credit Balance

Oct. 31 Balance  6,400

31 J1 4,800 1,600

Supplies

Date Explanation Ref. Debit Credit Balance

Oct. 31 Balance  3,900

31 J1 3,100 800

Land

Date Explanation Ref. Debit Credit Balance

Oct. 31 Balance  45,000

Cottages

Date Explanation Ref. Debit Credit Balance

Oct. 3 1 Balance  180,000

Accumulated Depreciation — Cottages

Date Explanation Ref. Debit Credit Balance

Oct. 31 Balance  4,500

 31 J1 9,000 13,500

Furniture

Date Explanation Ref. Debit Credit Balance

Oct. 31 Balance  36,000

Accumulated Depreciation — Furniture

Date Explanation Ref. Debit Credit Balance

Oct. 31 Balance  1,800

31 J1 3,600 5,400

Accounts Payable

Date Explanation Ref. Debit Credit Balance

Oct. 31 Balance  5,200

31 J1 425 5,625

Unearned Revenue

Date Explanation Ref. Debit Credit Balance

Oct. 31 Balance  7,500

31 J1 6,000 1,500

Salaries Payable

Date Explanation Ref. Debit Credit Balance

Oct. 31 J1 750 750

Interest Payable

Date Explanation Ref. Debit Credit Balance

Oct. 31 J1 2,700 2,700

Mortgage Payable

Date Explanation Ref. Debit Credit Balance

Oct. 31 Balance  90,000

Courtney Thind, Capital

Date Explanation Ref. Debit Credit Balance

Oct. 31 Balance  156,300

Courtney Thind, Drawings

Date Explanation Ref. Debit Credit Balance

Oct. 31 Balance  6,000

Service Revenue

Date Explanation Ref. Debit Credit Balance

Oct. 31 Balance  140,000

31 J1 6,000 146,000

31 J1 1,200 147,200

Depreciation Expense—Cottages

Date Explanation Ref. Debit Credit Balance

Oct. 31 J1 9,000 9,000

Depreciation Expense—Furniture

Date Explanation Ref. Debit Credit Balance

Oct. 31 J1 3,600 3,600

Insurance Expense

Date Explanation Ref. Debit Credit Balance

Oct. 31 J1 4,800 4,800

Interest Expense

Date Explanation Ref. Debit Credit Balance

Oct. 31 J1 2,700 2,700

Salaries Expense

Date Explanation Ref. Debit Credit Balance

Oct. 31 Balance  85,000

31 J1 750 85,750
Repair Expense

Date Explanation Ref. Debit Credit Balance

Oct. 31 Balance  1,900

Supplies Expense

Date Explanation Ref. Debit Credit Balance

Oct. 31 J1 3,100 3,100

Utilities Expense

Date Explanation Ref. Debit Credit Balance

Oct. 31 Balance  9,700

31 J1 425 10,125
C.

THIND DEVELOPMENTS
Adjusted Trial Balance
October 31, 2024

Debit Credit

Cash $31,400

Accounts receivable 1,200

Prepaid insurance ($6,400 − $4,800) 1,600

Supplies ($3,900 − $3,100) 800

Land 45,000

Cottages 180,000

Accumulated depreciation—cottages ($4,500 + $9,000) $13,500

Furniture 36,000

Accumulated depreciation—furniture ($1,800 + $3,600) 5,400

Accounts payable ($5,200 + $425) 5,625

Unearned revenue ($7,500 − $6,000) 1,500

Salaries payable 750

Interest payable 2,700

Mortgage payable 90,000

C. Thind, capital 156,300

 THIND DEVELOPMENTS
Adjusted Trial Balance
October 31, 2024

C. Thind, drawings 6,000

Service revenue ($140,000 + $6,000 + $1,200) 147,200

Depreciation expense—cottages 9,000

Depreciation expense—furniture 3,600

Insurance expense 4,800

Interest expense 2,700

Repairs expense 1,900

Salaries expense ($85,000 + $750) 85,750

Supplies expense 3,100

Utilities expense ($9,700 + $425) 10,125

$422,975 $422,975

D.

THIND DEVELOPMENTS
Income Statement
Year Ended October 31, 2024

Revenues

Service revenue $147,200

Expenses

Depreciation expense—cottages $ 9,000

Depreciation expense—furniture 3,600

Insurance expense 4,800

Interest expense 2,700

Repair expense 1,900

Salaries expense 85,750

Supplies expense 3,100

Utilities expense 10,125

Total expense 120,975

Profit $ 26,225
 THIND DEVELOPMENTS
Statement of Owner’s Equity
Year Ended October 31, 2024

C. Thind, Capital, October 31, 2023 $ 136,300*

Add: Investment $ 20,000

Profit for the year 26,225 46,225

182,525

Less: Drawings 6,000

C. Thind, Capital, October 31, 2024 $176,525

* $156,300 − $20,000 = $136,300

THIND DEVELOPMENTS
Balance Sheet
October 31, 2024

Assets

Cash $31,400

Accounts receivable 1,200

Prepaid insurance 1,600

Supplies 800

Land 45,000

Cottages $180,000

Less: Accumulated depreciation—cottages 13,500 166,500

Furniture 36,000

Less: Accumulated depreciation—furniture 5,400 30,600

Total assets $277,100

Liabilities and Owner’s Equity

Liabilities

Accounts payable $ 5,625

Salaries payable 750

Interest payable 2,700

Unearned revenue 1,500

Mortgage payable 90,000

Total liabilities 100,575

 THIND DEVELOPMENTS
Balance Sheet
October 31, 2024

Owner’s equity

C. Thind, Capital 176,525

Total liabilities and owner’s equity $277,100

Back: Problem 5 ([Link])

Demonstration Problem

Chapter 3
The Demonstration Problem below includes an Action Plan and electronic Working Papers (in Excel). Download
the Working Papers and complete the problem, using the Action Plan (be sure to save your work). Once you've
completed the problem, you can compare to the Solution, also available below.

Problem 6
The trial balance before adjustment of Ahmed Delivery Services at the end of its first month of operations follows:

Ahmed Delivery Services

Trial Balance
May 31, 2024

Debit Credit

Cash $ 3,000

Prepaid insurance 4,980

Supplies 650

Equipment 41,900

Notes payable $26,000

Unearned revenue 8,000

A. Ahmed, capital 13,170

A. Ahmed, drawings 2,200

Service revenue 17,400

Salaries expense 8,790

Advertising expense 800

Repairs expense 450

Rent expense 1,800

$64,570 $64,570

Instructions
a. Prepare adjusting entries at May 31, 2024, from the data and events listed below. Use any appropriate
accounts you feel are necessary.
Details of events and additional information:
1. The insurance policy has a one-year term that began May 1, 2024.
2. The annual depreciation on the equipment is $6,840.
3. The note payable was issued on May 1, 2024 to purchase the equipment and is due on May 1, 2027. It
carries interest at the rate of 6%.
4. Cash was collected from customers during the month and recorded to Unearned Revenue in advance of
delivering services. One-quarter (1/4) of the total amount received was determined as having been earned
by May 31, 2024.
5. A count of supplies at May 31, 2024 shows $350 of supplies on hand.
6. Employees are paid a combined total of $450 per day. At May 31, 2024, three days’ salaries remain unpaid.
7. Additional advertising costs of $200 have been incurred, but the invoices had not been received by May 31,
2024.
8. Customers having received services but for whom invoices had not yet been issued amounted to $1,900.

b. Prepare a statement of income for Ahmed Delivery Services for the month ended May 31, 2024.

Action Plan

Use the unadjusted balances along with the information that is given to arrive at adjusting entry
amounts.
Prepare any accrual or deferral adjusting entries. Use any appropriate accounts you feel are
necessary.
Make sure you consider the account that was used in the original transaction.
Keep in mind that you will need to summarize entries you prepare to complete the second portion of
this question, which is the preparation of the income statement for the month of May 2024.

Download the Working Papers (Excel Spreadsheet) (ch03_d6_worksheet_RM.xlsx)

Next: View the Solution ([Link])

Demonstration Problem

Chapter 3

Problem 6: Solution
J1

Insurance Expense 415

Prepaid Insurance 415

($4,980/12)

Depreciation Expense 570

Accumulated Depreciation - Equipment 570

($6,840/12)

Interest Expense 130

Interest Payable 130

($26,000 × 6% × 1/12)

Unearned Revenue 2,000

Service Revenue 2,000

($8,000/4)

Supplies Expense 300

Supplies 300

($650 - $350)

Salaries Expense 1,350

Salaries Payable 1,350

($450 X 3)

Advertising Expense 200

Accounts Payable 200

Accounts Receivable 1,900

Service Revenue 1,900

 Ahmed Delivery Services
Statement of Income
For the Month Ended May 31, 2024

Revenues

Service revenue $ 21,300

Expenses:

Salaries expense $10,140

Advertising expense 1,000

Repairs expense 450

Rent expense 1,800

Depreciation expense 570

Insurance expense 415

Interest expense 130

Supplies expense 300 14,805

Profit for the month $ 6,495

Calculations:

Unadjusted balance $17,400

2,000

1,900

Service revenue $21,300

Unadjusted balance $8,790

1,350

Salaries expense $10,140

Unadjusted balance $800

200

Advertising expense $1,000

Back: Problem 6 ([Link])