Adjusting Entries Selected account balances before adjustment for Intuit Realty

Question

Adjusting Entries

Selected account balances before adjustment for Intuit Realty at November 30, the end of the current year, follow:

Data needed for year-end adjustments are as follows:

Required:

Supplies on hand at November 30, $470.

Depreciation of equipment during year, $780.

Rent expired during year, $4,780.

Wages accrued but not paid at November 30, $1,510.

Unearned fees at November 30, $3,020.

Unbilled fees at November 30, $3,590.

1. Journalize the six adjusting entries required at November 30, based on the data presented.

2. What would be the effect on the income statement if the adjustments for equipment depreciation and unearned fees were omitted at the end of the year? Enter all amounts as positive numbers.

3. What would be the effect on the balance sheet if the adjustments for equipment depreciation and unearned fees were omitted at the end of the year? Enter all amounts as positive numbers.

4. What would be the effect on the “Net increase or decrease in cash” on the statement of cash flows if the adjustments for equipment depreciation and unearned fees were omitted at the end of the year?

Debits Credits Accounts Receivable $52,000 Equipment 80,000 Accumulated Depreciation - Equipment $8,010 Prepaid Rent 6,600 Supplies 1,560 Wages Payable _ Unearned Fees 7,180 Fees Earned 303,680 Wages Expense 102,440 Rent Expense _ Depreciation Expense _ Supplies Expense _

Explanation / Answer

Answer 1

Answer 2

Omitting the adjustment entry for deprecation will lead to reduction in expense by that amount and subsequently increase the net income.

Whereas omitting the adjustment entry for unearned fees will reduce the fees earned and subsequently reduce the net income

Answer 3

Answer 4

Since both the omitted transcations are non cash in nature it will not have any effect on the cash flow statement

Date Particulars Amount Amount Nov-30 Supplies Expense 1090 Supplies 1090 (Being supplies used during the month) Nov-30 Depreciation Expense 780 Accumulated Depreciation 780 (Being depreciation expense on equipment for the current year) Nov-30 Rent Expense 4780 Prepaid Rent 4780 (Being rent expense for the current year adjusted against prepaid rent) Nov-30 Wages Expense 1510 Wages Payable 1510 (Being wages due but not paid for November) Nov-30 Unearned Fees 4160 Fees Earned 4160 (Being adjustment entry for unearned fees balance recorded) Nov-30 Accounts Receivable 3590 Fees Earned 3590 (Being unbilled fees accounted for)

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