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
Accounts Receivables
Office Equipment
Accumulated Depreciation: Office
Equipment
Accounts Payable
Income Taxes Payable
Capital Stock
Retained Earnings
Dividends
Commissions Earned
Advertising Expense
Salaries Expense
Rent Expense
Totals
$22,565
7.050
9,600
160
2,260
4,965
20,000
7,450
2,500
31,080
2,400
18,000
3,800
$65,915 $65,915
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.