Selected account balances before adjustment for Alantic Coast Realty at July 31,

Question

Selected account balances before adjustment for Alantic Coast Realty at July 31, 2016, the end of the current year, are as follows:

Data needed for year-end adjustments are as follows:

Chart of Accounts

Final Questions

2. What would be the effect on the income statement if adjustments (a) and (f) were omitted at the end of the year?

3. What would be the effect on the balance sheet if adjustments (a) and (f) were omitted at the end of the year?

4. What would be the effect on the “Net increase or decrease in cash” on the statement of cash flows if adjustments (a) and (f) were omitted at the end of the year?

Debits Credits Accounts Receivable $ 75,000 Equipment 345,700 Accumulated Depreciation—Equipment $112,500 Prepaid Rent 9,000 Supplies 3,350 Wages Payable – Unearned Fees 12,000 Fees Earned 660,000 Wages Expense 325,000 Rent Expense – Depreciation Expense – Supplies Expense –

Explanation / Answer

1.

2.

3.

4. There would be no effect on the "net increase or decrease in cash" on the statement of cash flows if adjustments (a) and (f) were omitted since the adjusting entries do not affect the cash account.

Transaction Account Titles and Explanation Debit Credit a. Accounts receivable 11150 Fees earned 11150 (To record unbilled fees) b. Supplies expense ($3350 - $900) 2450 Supplies 2450 (To record supplies expense) c. Rent expense 6000 Prepaid rent 6000 (To record rent expired) d. Depreciation expense 8950 Accumulated depreciation-office equipment 8950 (To record depreciation expense) e. Unearned fees 10000 Fees earned 10000 (To record fees earned) f. Wages expense 4840 Wages payable 4840 (To record wages accrued but not paid)

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