NOTE: Although this problem is different from that found in the text, you may use the working papers designed for Problem 3-3B in solving this problem.

A six-column table for Daxu Consulting Company follows. The first two columns contain the unadjusted trial balance for the company as of December 31, 2002, and the last two columns contain the adjusted trial balance as of the same date.

Account	Unadjusted Trial Balance		Adjustments		Adusted Trial Balance
Cash	$56,000				$56,000
Accounts Receivable	40,000				47,500
Office Supplies	35,000				15,000
Prepaid Insurance	7,600				5,000
Office Equipment	120,000				120,000
Accumulated Depr.-Office Equipment		$25,000				$35,000
Accounts Payable		32,000				40,000
Interest Payable		-0-				2,350
Salaries Payable		-0-				15,000
Unearned Consulting Fees		26,000				20,000
Long-Term Notes Payable		60,000				60,000
Common Stock		30,000				30,000
Retained Earnings		46,000				46,000
Consulting Fees Earned		236,200				249,700
Depr. Expense - Office Equip.	-0-				10,000
Salaries Expense	112,000				127,000
Interest Expense	7,600				9,950
Insurance Expense	-0-				2,600
Rent Expense	40,000				40,000
Office Supplies Expense	-0-				20,000
Advertising Expense	37,000				45,000
Totals	$455,200	$455,200			$498,050	$498,050

Required:

Analysis Component

1. Analyze the differences between the unadjusted and adjusted trial balances to determine the adjustments that must have been made. Show the results of your analysis by inserting these adjustment amounts in the table's two middle columns. Label each adjustment with a letter and provide a short description of it.

Preparation Component

2. Use the information in the adjusted trial balance to prepare this company's (a) income statement and statement of retained earnings for the year ended December 31, 2002 (Note: retained earnings at December 31, 2001 were $56,000, and the current-year dividends were $10,000), and (b) the balance sheet as of December 31, 2002.

3. Calculate the company's Profit Margin for the year ended December 31, 2002.