Accounting

P2-3A Grant Advertising Agency Inc. was organized in January 2002.
Presented below are

both the adjusted and unadjusted trial balances as of December 31, 2002.

GRANT ADVERTISING AGENCY INC.

Trial Balance

December 31, 2002

Unadjusted Adjusted

Dr. Cr. Dr. Cr.

Cash $ 11,000
$ 11,000

Accounts Receivable 20,000 21,500

Art Supplies 8,600 5,000

Prepaid Insurance 3,350
2,500

Printing Equipment 60,000
60,000

Accumulated Depreciation $ 28,000 $ 35,000

Accounts Payable 5,000
5,000

Interest Payable
–0–
150

Notes Payable
5,000
5,000

Unearned Advertising Fees
7,200
5,600

Salaries Payable
–0–
1,300

Common Stock
25,500
25,500

Retained Earnings
–0–
–0–

Dividends 12,000 12,000

Advertising Revenue 58,600 61,700

Salaries Expense 10,000 11,300

Insurance Expense 850

Interest Expense 350 500

Depreciation Expense 7,000

Art Supplies Expense 3,600

Rent Expense 4,000 4,000

$129,300 $129,300 $139,250
$139,250

Instructions

(a) Journalize the annual adjusting entries that were made.

(b) Prepare an income statement and a retained earnings statement for
the year ending

December 31, 2002, and a balance sheet at December 31.

(c) Answer the following questions.

(1) If the note has been outstanding 6 months, what is the annual
interest rate on that

note?

(2) If the company paid $13,500 in salaries in 2002, what was the
balance in Salaries

Payable on December 31, 2001?