Paris Bicycle Adjusting Journal Entries.Use the following assumptions as you analyze Paris Bicycle’s

Paris Bicycle Adjusting Journal Entries.Use the following assumptions as you analyze Paris Bicycle’s Unadjusted Trail Balance for potential adjusting entries:1) Assume that the entire CASH balance earns interest of 5% (annual rate of interest) AND assume, (for simplicity regarding this account only), that the entire CASH balance earns interest for 1 complete month of January2) For the Unearned Rent Revenue, pay attention to the date of the transaction3) The tax rate for Paris Bike is 30%4) There are 6 adjusting entires that should be made. The first is already done and posted(1) Paris Bicycle Sales began operations on January 2, 2010 with a stock issuance. Paris issued 1,000shares of no par value stock for $25 per share.1/2/2010CashAáCommon StockOEáIssued 1000 shares of common stock$25,000$25,000(2) On Jan. 2, 2010, Paris paid the rent on its building. The rent is $6,000 per year and must be prepaidon the first day of each year.(3) On Jan. 2, 2010, Paris purchased equipment for the showroom from Taylor Fixtures, Inc. The totalcost of the equipment was $12,000. Paris bought the equipment with cash. The equipment has anexpected useful life of 10 years and will be worthless at the end of 10 years.(4) On Jan. 4, 2010, Paris received a 3 year $120,000 10% bank loan that pays interest semi-annually onJune 30 and December 31 of each year.(5) On Jan. 5, 2010, Paris purchased 100 bikes at a cost of $100 per bike from Schwinn. The purchasewas made on account.(6) Paris sublet a small portion of the bike shop to Chip the repair guy. Chip will pay $100 a monthstarting on January 15 and Paris requires Chip to pay a whole year’s rent in advance.(7) On Jan. 15, 2010, Paris paid Schwinn $8,000 towards the outstanding balance owed to Schwinn.(8) On Jan. 18, 2010, Paris sold 10 bikes to the Smith Daycare Co. for $220 per bike. Paris acceptedcredit for the sales.(9) On Jan. 24, 2010, the Smith Daycare Co. paid $1,000 in partial payment of their outstanding account.Use the following assumptions as you analyze Paris Bicycle’s Unadjusted Trial Balance for potentialadjusting entries:1) Assume that the entire CASH balance earns interest of 5% (annual rate of interest) AND assume, (forsimplicity regarding this account only), that the entire CASH balance earns interest for 1 completemonth in January.2) For the Unearned Rent Revenue, pay attention to the date of the transaction3) The tax rate for Paris Bike is 30%4) There are 6 adjusting entries that should be made. The first is already done and posted as anexample.(A) Paris used its rented building for the month of January.1/31/2010 OEâ Rent ExpensePrepaid RentAâIncurred 1 month of rent expense against prepaid rent account$500$500(B) Paris earned (but did not collect) rent for the second half of January (1/2 of $100/month) for theportion of the bike shop it sublet to Chip the repair guy.(C) Paris earned (but did not collect) 5% interest on its month-end cash balance for the month of January(5% x $121,200 / 12 months)(D) Paris incurred (but did not pay) interest expense on its $120,000 loan (10% x $120,000 / 12)(E) Paris used its equipment for 1 month of its 10-year useful life ($12,000 straight-line for 1/120)(F) Paris incurred (but did not pay) income tax expense on its income before taxes(30% x $155)1-Jan(1)Cash025,000Accounts Receivable1-Jan01-Jan31-Jan25,00031-Jan31-Jan1-JanInventory01-Jan0Prepaid Rent0Interest Receivable00Equipment01-Jan500 (A)31-Jan031-JanAccumulated Depreciation0 1-Jan(500)Accounts Payable01-JanRetained Earnings025,000 31-Jan1-Jan31-JanCost of Goods Sold0001-Jan0 31-Jan1-JanRent Revenue1-JanInterest Revenue00 31-JanInterest Expense01-Jan0 31-JanSales Revenue0Notes Payable0 31-Jan0 1-Jan25,000 (1)31-Jan0 31-Jan0Common Stock1-Jan1-JanUnearned Rent Revenue0 1-JanInterest Payable0 31-Jan000 31-Jan0 31-JanIncome Tax Payable031-Jan1-Jan00 31-Jan1-Jan(A)31-JanRent Expense05005000 31-JanDepreciation Expense1-Jan031-Jan0Income Tax Expense1-Jan031-Jan01-JanCheck Totalsvs. Trial Balancedrcr25,00025,000Working Trial Balance WorksheetNote: (Pull numbers from General Ledger)(this column auto-calcs)Account nameUnadj. Trial BalancedrcrCashAccounts ReceivableInterest ReceivableInventoryPrepaid RentEquipmentAccumulated DepreciationAccounts PayableUnearned Rent RevenueIncome Tax PayableInterest PayableNotes PayableCommon StockRetained EarningsSales RevenueRent RevenueInterest RevenueCost of Goods SoldRent ExpenseDepreciation ExpenseInterest ExpenseIncome Tax ExpenseTotals(A)(A)0Income Before Taxes SubtotalIncome Tax Rate (30%)Calculated Income Tax ExpenseNet IncomeAdjusting Entriesdrcr0500(this column auto-calcs)Closing EntriesdrcrFinal Trial Balancedrcr500(500)(500)500500500Adj. Trial Balancedrcr50000(500)30.0%(150)(500)0000Paris BikeIncome StatementFor the Month Ended January 31, 2010(single step version)Revenues:Sales RevenueRent RevenueInterest RevenueTotal Revenues$000$0Expenses:Cost of Goods SoldRent ExpenseDepreciation ExpenseInterest ExpenseIncome Tax ExpenseTotal Expenses$0500000500Net Income:$(500)Paris BikeStatement of Stockholders’ EquityFor the Month Ended January 31, 2010Beginning Balance, Jan. 1, 2010Issue of Common StockCommonStock$0RetainedEarnings$00Add: Net Income(500)Less: Dividends0Ending Balance, Jan. 31, 2010$0$(500)Paris BikeBalance SheetAs Of January 31, 2010Assets:Current Assets:CashAccounts ReceivableInterest ReceivableInventoryPrepaid RentTotal Current AssetsLong-Term Assets:EquipmentLess Accumulated Depreciation$0000(500)$(500)00Total AssetsLiabilities:Current Liabilities:Accounts PayableUnearned Rent RevenueIncome Tax PayableInterest PayableTotal Current LiabilitiesNotes PayableTotal LiabilitiesStockholders’ Equity:Common StockRetained EarningsTotal Stockholders’ EquityTotal Liabilities and Stockholders’ Equity$(500)$000000$0$00$0$0

 

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