Question

At the end of August, the first month of operations, the following data was taken from the financial statements of LDP Consultants, Inc. Net income for August $ 85,000 Total assets at August 31 $ 650,000 Total liabilities at August 31 $ 200,000 Total stockholders’ equity at August 31 $450,000

In preparing the financial statements, adjustments for the following data were overlooked: 1. Unbilled fees earned at August 31 $ 5,200 2. Depreciation of equipment for August $3,500 3. Prepaid insurance expired for August $750 4. Accrued wages at August 31 $ 2,000 Instructions: Based on the accounting equation, determine the effect of each omitted adjustment to net income, total asset s, total liabilities, and total equities. In addition, determine the correct amounts after adjustments for the accounts mentioned above. Net Income Total Assets =Total Liabilities+ Total Equity Reported Amounts $ 85,000 $ 650,000 $ 200,000 $450,000 Adjustment #1 Adjustment #2 Adjustment #3 Adjustment #4 Corrected Amounts

Answer 1

	Net Income	Total Assets	=	Total Liabilities	+	Total Stockholders' Equity
Reported amounts	85,000	650,000		200,000		450,000
Corrections:
Adjustment (a)	5,200	5,200		-		5,200
Adjustment (b)	(3,500)	(3,500)		-		(3,500)
Adjustment (c)	(750)	(750)		-		(750)
Adjustment (d)	(2,000)	-		2,000		(2,000)
Corrected amounts	83,950	650,950		202,000		448,950