a. The company received its electric bill on December 20 for $375 but will not p
ID: 2337000 • Letter: A
Question
a. The company received its electric bill on December 20 for $375 but will not pay it until January 5. (Use the Utilities Payable account.)
b. Dillon purchased a six-month boat insurance policy on November1 for $3000.
Dillon recorded a debit to Prepaid Insurance.
C. As of December 31, Dillon had earned $3, 500 of charter revenue that has not been recorded or received.
d. Dillon's fishing boat was purchased on January 1 at a cost of $ 79, 600
Dillon expects to use the boat for ten years and that it will have a residual value of $ 4,600
Determine annual depreciation assuming the straight-line depreciation method is used.
e. On October 1, Dillon received $9,000 prepayment for a deep-sea fishing charter to take place in
December.
As of December 31,Dillon has completed the charter. (When the cash was received, assume that a liability account was credited.)
Requirement 2. If Dillon had not recorded the adjusting entries, indicate which specific category of accounts on the financial statements would be misstated and if the misstatement is overstated or understated.
Begin by completing the table for adjustment a and then transactions b through e.
Requirements 1. Journalize the adjusting entries needed on December 31 for Dillon Fishing Charters. Assume Dillon records adjusting entries only at the end of the year. 2. If Dillon had not recorded the adjusting entries, indicate which specific category of accounts on the financial statements would be misstated and if the misstatement is overstated or understated.Explanation / Answer
Date Account Title and Explanation Debit Credit a Dec, 31 Utilities Expense 375 Utilities Payable 375 (To record utilities payable) b Dec, 31 Insurance Expense 1000 (3000/6)*2 Prepaid Insurance 1000 (To record insurance expense) c Dec, 31 Accounts Receivable 3500 Service Revenue 3500 (To record service Revenue) d Dec, 31 Depreciation expense - Boat 7500 (79600-4600)/10 Accumulated Depreciation - Boat 7500 (To record boat expense) e Dec, 31 Unearned Revenue 9000 Service Revenue 9000 (To record service Revenue) Specific category of accounts on balance sheet Over/understatement Specific category of accounts on Income Statement Over/understatement a Liability Expense Understated Equity b Asset Expense Understated Equity c Asset Revenue Understated Equity d Asset Expense Understated Equity e Liability Revenue Understated Equity
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