Net income for August $112,500
Total assets at August 31 650,000
Total liabilities at August 31 225,000
Total owner’s equity at August 31 425,000
In preparing the financial statements, adjustments for the following data were overlooked:
a. Unbilled fees earned at August 31, $31,900.
b. Depreciation of equipment for August, $7,500.
c. Accrued wages at August 31, $5,200.
d. Supplies used during August, $3,000.
Instructions
1. Journalize the entries to record the omitted adjustments.
2. Determine the correct amount of net income for August and the total assets, liabilities, and owner’s equity at August 31. 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:
$112,500 $650,000 $225,000 $425,000
Adjustment (a) +31,900 +31,900 0 +31,900
Adjustment (b) _________ _________ _________ _________
Adjustment (c) _________ _________ _________ _________
Adjustment (d) _________ _________ _________ _________
Corrected amounts
Answer:
1. a Accounts Receivable 31,900
Fees Earned 31,900
Accrued fees earned.
b.
Depreciation Expense 7,500
Accumulated Depreciation—Equipment 7,500
Equipment depreciation.
c.
Wages Expense 5,200
Wages Payable 5,200
Accrued wages.
d.
Supplies Expense 3,000
Supplies 3,000
Supplies used.
2. Net
Income
Total
Assets =
Total
Liabilities +
Total
Owner's
Equity
Reported amounts $112,500 $650,000 $225,000 $425,000
Corrections:
Adjustment (a) +31,900 +31,900 0 +31,900
Adjustment (b) –7,500 –7,500 0 –7,500
Adjustment (c)
Adjustment (d)
–5,200
–3,000
0
–3,000
+5,200
0
–5,200
–3,000
Corrected amounts $128,700 $671,400 $230,200 $441,200
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