Question

Adjusting Entries

Selected account balances before adjustment for Intuit Realty at November 30, the end of the current year, follow:

	Debits		Credits
Accounts Receivable	$75,000
Equipment	250,000
Accumulated Depreciation—Equipment			$12,000
Prepaid Rent	12,000
Supplies	3,170
Wages Payable			–
Unearned Fees			10,000
Fees Earned			400,000
Wages Expense	140,000
Rent Expense	–
Depreciation Expense	–
Supplies Expense	–

Data needed for year-end adjustments are as follows:

Required:

• Supplies on hand at November 30, $550.
• Depreciation of equipment during year, $1,675.
• Rent expired during year, $8,500.
• Wages accrued but not paid at November 30, $2,000.
• Unearned fees at November 30, $4,000.
• Unbilled fees at November 30, $5,380.

1. Journalize the six adjusting entries required at November 30, based on the data presented. If an amount box does not require an entry, leave it blank.

Nov. 30
30
30
30
30
30

2. What would be the effect on the income statement if the adjustments for equipment depreciation and unearned fees were omitted at the end of the year? Enter all amounts as positive numbers.

Fees earned		by $
Depreciation expense		by $
Net income		by $

3. What would be the effect on the balance sheet if the adjustments for equipment depreciation and unearned fees were omitted at the end of the year? Enter all amounts as positive numbers.

Accumulated depreciation		by $
Total assets		by $
Unearned fees		by $
Total liabilities		by $
Owner's equity		by $
Total liabilities and owner's equity		by $

4. What would be the effect on "Net increase or decrease in cash" on the statement of cash flows if the adjustments for equipment depreciation and unearned fees were omitted at the end of the year?

Answer 1

Requirement 1 | Adjusting Entries Particulars Debit Credit $ 2,620 Supplies Expense Supplies $ 2,620 $ $ 1,675 Depreciation Expense Accumulated Depreciation $ $ 1,675 $ $ 8,500 Rent Expense Prepaid Rent $ 8,500 $ $ 2,000 Wages Expense Wages Payables $ $ 2,000 $ 6,000 Unearned Fees Fees Earned $ $ 6,000 $ 5,380 Accounts Receivables Fees Earned $ 5,380 Requirement 2 Fees Earned Depreciation Net Income Understated by $ 6,000 Understated by $ 1,675 Understated by $ 4,325 [$ 6,000 - $ 1,675]

Requirement 3 Accumulated Depreciation Total Assets Unearned Fees Total Liabilities Owners' Equity Total Liabilities and Owners' Equity Understated by $ 1,675 Overstated by $ 1,675 Overstated by $ 6,000 Overstated by $ 6,000 Understated by $ 4,325 [$ 6,000 - $ 1,675] Overstated by $ 1,675 [$ 6,000 - $ 4,325] Requirement 4 There would be NO EFFECT on Statement of Cash Flow's Section - Net Increase or Decrease in Cash. Because None of the entries have the effect on Cash.