P3-3A Fernetti Advertising Agency, Inc. was founded by John Fernetti in January of 2007. Presented below are both the adjusted and unadjusted trial balances as of December 31, 2008. FERNETTI ADVERTISING AGENCY, INC. Trial Balance December 31, 2008 Unadjusted Adjusted Dr. Cr. Dr. Cr. Cash $ 11,000 $ 11,000 Accounts Receivable 20,000 22,500 Art Supplies 8,600 5,000 Prepaid Insurance 3,350 2,500 Printing Equipment 60,000 60,000 Accumulated Depreciation $ 28,000 $ 34,000 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 25,000 25,000 Retained Earnings 500 500 Dividends 12,000 12,000 Advertising Revenue 58,600 62,700 Salaries Expense 10,000 11,300 Insurance Expense 850 Interest Expense 350 500 Depreciation Expense 6,000 Art Supplies Expense 3,600 Rent Expense 4,000 ______ 4,000 _______ $129,300 $129,300 $139,250 $139,250 ======= ====== ====== ====== (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, 2008, and a balance sheet at December 31.

(a) Dec. 31 Accounts Receivable 2,500 Advertising Revenue 2,500

31 Art Supplies Expense 3,600 Art Supplies 3,600

31 Insurance Expense 850 Prepaid Insurance 850

31 Depreciation Expense 6,000 Accumulated Depreciation 6,000

31 Interest Expense 150 Interest Payable 150

31 Unearned Advertising Fees 1,600 Advertising Revenue 1,600

31 Salaries Expense 1,300 Salaries Payable 1,300

(b) FERNETTI ADVERTISING AGENCY, INC. Income Statement For the Year Ended December 31, 2008

Revenues Advertising revenue $62,700 Expenses Salaries expense $11,300 Depreciation expense 6,000 Rent expense 4,000