Question 6 (9 Marks) On December 31, 2015, Skitop Company prepared an income sta

Question

Question 6 (9 Marks) On December 31, 2015, Skitop Company prepared an income statement and balance sheet and failed to take into account three adjusting entries. The incorrect income statement showed Profit of $40,000 The incorrect balance sheet showed total assets, $130,000; total liabilities, $60,000, and owner's equity, $70,000 The data for the three adjusting entries were 1 Depreciation of $9,000 was not recorded on equipment. 2 Wages amounting to $10,000 for the last two days in December were not paid and not recorded The next payroll will be in January 3 Rent of $7.,000 was paid for two months in advance on December 1. The entire amount was debited to Prepaid Rent when paid Instructions In your examination booklet, prepare a table in the following format to correct the financial statement amounts shown (indicate deductions with parentheses) lem Profit Total Assets Total Liabilities Owner's Equity Incorrect balances 40,000 $130,000 6000 $70,000 Effects of Depreciation Wages Rent Correct Balances

Explanation / Answer

Profit Asset Liabilities Equity

Incorrect balances 40000 130000 60000 70000

Depreciation -9000 -9000

Wages -10000 +10000

Rent -3500 -3500 -22500(40-17.5)

Correct amt 17500 117500 70000. 47500   

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