Problem 3-3 (Part Level Submission)A review of the ledger of Windsor, Inc. at December...

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Accounting

Problem 3-3 (Part Level Submission)
A review of the ledger of Windsor, Inc. at December 31 producesthe following data for the preparation of annual adjustingentries:
1. Salaries and Wages Payable, $0. There are 9 salaried employees.4 employees receive a salary of $1,230 each per week, and 5employees earn $750 each per week. Employees do not work weekends.All employees worked two days after the last pay period and beforeDecember 31.
2. Unearned Rent Revenue, $376,020. The company began subleasingcondos in its new building on November 1. Each tenant has to make a$5,400 security deposit that is not refundable until occupancy isended. At December 31, the company had the following rentalcontracts that were paid in full for the entire term of thelease:
Date Term
(in months) Monthly Rent Number
of Leases
Nov. 1 6 $3,910 6
Dec. 1 6 $10,370 3
3. Prepaid Advertising, $14,820. This balance consists of paymentson two advertising contracts. The contracts provide for monthlyadvertising in two trade magazines. The terms of the contracts areas follows:
Contract Date Amount Number of
magazines Issues
A650 May 1 $6,780 12
B974 Oct. 1 8,040 24
The first advertisement runs in the month in which the contractis signed.
4.
Notes Payable, $80,520. This balance consists of a one year, 9%,note that is dated June 1.

Windsor is preparing for a meeting with potential investors.What is the net effect of the adjusting entries on net income?

Answer & Explanation Solved by verified expert

4.2 Ratings (732 Votes)

In Net effect the Net Income will increase by 64,809.70

Calculation is given below:

Rent Revenue
Nov 1 - (63910)2	$ 46,920.00
Dec 1- (310370)1	$ 31,110.00
Total Rent Revenue Recognised---- (A)		$ 78,030.00
Salaries and Wages
Four Employees - (12304)/52	$ 1,968.00
Five Employees - (7505)/52	$ 1,500.00
Total Salary Expenses --- (B)		$ 3,468.00
Advertising Expenses
May 1 - 6780/12*8	$ 4,520.00
Oct 1 - 8040/24*3	$ 1,005.00
Total Advertising Expenses---©		$ 5,525.00
Interest Expenses ( 805209%/127)---(D)		$ 4,227.30
Net Effect (A - (B+C+D))		$ 64,809.70

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In: AccountingProblem 3-3 (Part Level Submission)A review of the ledger of Windsor, Inc. at December 31...Problem 3-3 (Part Level Submission)A review of the ledger of Windsor, Inc. at December 31 producesthe following data for the preparation of annual adjustingentries:1.Salaries and Wages Payable, $0. There are 9 salaried employees.4 employees receive a salary of $1,230 each per week, and 5employees earn $750 each per week. Employees do not work weekends.All employees worked two days after the last pay period and beforeDecember 31.2.Unearned Rent Revenue, $376,020. The company began subleasingcondos in its new building on November 1. Each tenant has to make a$5,400 security deposit that is not refundable until occupancy isended. At December 31, the company had the following rentalcontracts that were paid in full for the entire term of thelease:DateTerm(in months)Monthly RentNumberof LeasesNov. 16$3,9106Dec. 16$10,37033.Prepaid Advertising, $14,820. This balance consists of paymentson two advertising contracts. The contracts provide for monthlyadvertising in two trade magazines. The terms of the contracts areas follows:ContractDateAmountNumber ofmagazines IssuesA650May 1$6,78012B974Oct. 18,04024The first advertisement runs in the month in which the contractis signed.4.Notes Payable, $80,520. This balance consists of a one year, 9%,note that is dated June 1.Windsor is preparing for a meeting with potential investors.What is the net effect of the adjusting entries on net income?

1.		Salaries and Wages Payable, $0. There are 9 salaried employees.4 employees receive a salary of $1,230 each per week, and 5employees earn $750 each per week. Employees do not work weekends.All employees worked two days after the last pay period and beforeDecember 31.
2.		Unearned Rent Revenue, $376,020. The company began subleasingcondos in its new building on November 1. Each tenant has to make a$5,400 security deposit that is not refundable until occupancy isended. At December 31, the company had the following rentalcontracts that were paid in full for the entire term of thelease:

Date	Term (in months)	Monthly Rent	Number of Leases
Nov. 1	6	$3,910	6
Dec. 1	6	$10,370	3

Contract	Date	Amount	Number of magazines Issues
A650	May 1	$6,780	12
B974	Oct. 1	8,040	24