The income statement of Pharoah Company for the month of July shows net income of $2,200 based on Service Revenue

Question

The income statement of Pharoah Company for the month of July shows net income of $2,200 based on Service Revenue $6,100, Salaries and Wages Expense $2,300, Supplies Expense $1,000, and Utilities Expense $600. In reviewing the statement, you discover the following 1. 2. 3. Insurance expired during July of $300 was omitted. Supplies expense includes $150 of supplies that are still on hand at July 31. Depreciation on equipment of $250 was omitted. Accrued but unpaid salaries and wages at July 31 of $400 were not included. Services performed but unrecorded totaled $800. 4 5. Prepare a correct income statement for July 2020. Pharoah Company Income Statement The trial balances before and after adjustment for Monty Corp. at the end of its fiscal year are presented below. Monty Corp. Trial Balance August 31, 2020 Before Adjustment After Adjustment Dr. Cr. Dr. Cr. $10,300 9,000 2,400 3,900 13,100 $10,300 9,700 700 2,700 13,100 $ 3,600 5,900 $ 4,300 5,900 1,000 800 Cash Accounts Receivable

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1. PFA 2. Date Accounts Titles and Explanation Debit Credit Aug. 31 Accounts receivable 700 Service revenue 700 (To record accrued revenue) Aug. 31 Supplies expense 1,700 Supplies 1,700 ( To record supplies used) Aug. 31 Insurance expense 1,200 Prepaid insurance 1,200 (To record expired insurance) Aug. 31 Depreciation expense 700 Accumulated depreciation - Equipment 700 ( To record depreciation) Aug. 31 Salaries and wages expense 1,000 Salaries and wages payable 1,000 (To record accrued salaries) Aug. 31 Unearned rent revenue 700 Rent revenue 700 ( To record rent earned) 3. Weighted average interest rate = (2.44*10 + 3.66*12)/(2.44+3.66) = 11.2% Interest applicable to contract = 1098000 * 11.2% *10/12 = 102480 1830000 * 11.2% * 4/12 = 68320 1952000 * 11.2% * 0 = 0 Interest applicable during the interest period= 170800 Total interest paid during the year June'20 to May'21: 5 years note = 2.44*10% = 244000 10 years bond = 3.66*12% = 439200 Total Interest paid = 683200 Avoidable interest = total interest paid - interest appli on contract Avoidable interest = 683200 - 170800 = 512400

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The income statement of Pharoah Company for the month of July shows net income of $2,200 based on Service Revenue $6,100, Salaries and Wages Expense $2,300, Supplies Expense $1,000, and Utilities Expense $600

Expert Solution

Archived Solution

Date	Accounts Titles and Explanation	Debit	Credit
Aug. 31	Accounts receivable	700
	Service revenue		700
	(To record accrued revenue)
Aug. 31	Supplies expense	1,700
	Supplies		1,700
	( To record supplies used)
Aug. 31	Insurance expense	1,200
	Prepaid insurance		1,200
	(To record expired insurance)
Aug. 31	Depreciation expense	700
	Accumulated depreciation - Equipment		700
	( To record depreciation)
Aug. 31	Salaries and wages expense	1,000
	Salaries and wages payable		1,000
	(To record accrued salaries)
Aug. 31	Unearned rent revenue	700
	Rent revenue		700
	( To record rent earned)

Weighted average interest rate = (2.4410 + 3.6612)/(2.44+3.66) = 11.2%

Interest applicable to contract =
1098000 * 11.2% *10/12 =	102480
1830000 * 11.2% * 4/12 =	68320
1952000 * 11.2% * 0 =	0
Interest applicable during the interest period=	170800


Total interest paid during the year June'20 to May'21:
5 years note = 2.44*10% = 244000
10 years bond = 3.66*12% = 439200
Total Interest paid = 683200


Avoidable interest = total interest paid - interest appli on contract
Avoidable interest = 683200 - 170800 = 512400