Net income for April $120,000
Total assets at April 30 750,000
Total liabilities at April 30 300,000
Total owner’s equity at April 30 450,000
In preparing the financial statements, adjustments for the following data were overlooked:
a. Supplies used during April, $2,750.
b. Unbilled fees earned at April 30, $23,700.
c. Depreciation of equipment for April, $1,800.
d. Accrued wages at April 30, $1,400.
Instructions
1. Journalize the entries to record the omitted adjustments.
2. Determine the correct amount of net income for April and the total assets, liabilities, and owner’s equity at April 30. In addition to indicating the corrected amounts, indicate the effect of each omitted adjustment by setting up and completing a columnar table similar to the following. Adjustment (a) is presented as an example.
Net
Income
Total
Assets
Total
Liabilities
Total Owner’s
Equity
Reported amounts
Corrections:
$120,000 $750,000 $300,000 $450,000
Adjustment (a) –2,750 –2,750 0 –2,750
Adjustment (b) _________ _________ _________ _________
Adjustment (c) _________ _________ _________ _________
Adjustment (d) _________ _________ _________ _________
Corrected amounts
Answer:
1. a. Supplies Expense 2,750
Supplies 2,750
Supplies used.
b. Accounts Receivable 23,700
Fees Earned 23,700
Accrued fees earned.
c. Depreciation Expense 1,800
Accumulated Depreciation—Equipment 1,800
Equipment depreciation.
d. Wages Expense 1,400
Wages Payable 1,400
Accrued wages.
2. Total
Net Total Total Owner's
Income Assets = Liabilities + Equity
Reported amounts $120,000 $750,000 $300,000 $450,000
Corrections:
Adjustment (a) –2,750 –2,750 0 –2,750
Adjustment (b) +23,700 +23,700 0 +23,700
Adjustment (c)
Adjustment (d)
–1,800
–1,400
–1,800
0
0
+1,400
–1,800
–1,400
Corrected amounts $137,750 $769,150 $301,400 $467,750