Department of Management
Accounting and Finance for Managers
Date: December, 2022
Assignment two:
Key Insurance Agency was organized on October 1, 2020. Assume that the
accounts are closed and financial statements prepared each month. The
company occupies rented office space but owns office equipment estimated
to have a useful life of 10 years from date of acquisition, October 1. The trial
balance for Key Insurance Agency at December 31 is shown below.
Cash $22,565
Accounts Receivables 7.050
Office Equipment 9,600
Accumulated Depreciation: Office 160
Equipment
Accounts Payable 2,260
Income Taxes Payable 4,965
Capital Stock 20,000
Retained Earnings 7,450
Dividends 2,500
Commissions Earned 31,080
Advertising Expense 2,400
Salaries Expense 18,000
Rent Expense 3,800
Totals $65,91 $65,91
5 5
Instructions:
a. Prepare the adjusting entry to record depreciation of the office
equipment for the month of December, using the straight line method
of computing depreciation expense.
b. Compute Taxable income for December – assume this is the same as
“Income before income taxes.” Using a corporate income tax rate of
40%, prepare the adjusting entry to accrue Key Insurance Agency’s
income taxes for the month of December 31, 2020.
c. Prepare an adjusted trial balance at December 31, 2020.
d. Prepare an income statement and a statement of retained
earnings for the month ended December 31, 2020, and a balance
sheet in report form at December 31, 2020.
