Question

In: Accounting

Pitchfork Consulting Services has a fiscal year end of December 31st. It is in its first...

Pitchfork Consulting Services has a fiscal year end of December 31st. It is in its first year of operations. As of December 31, Pitchfork has the following unadjusted trial balance:

Account Debit Credit
Cash $ 430,900
Accounts Receivable $158,000
Supplies $   11,000
Building $ 190,000
Accounts Payable $ 46,100
Unearned Service Revenue $ 108,000
Common Stock $ 100,000
Retained Earnings -0-
Service Revenue $ 619,200
Wage Expense $ 48,600
Insurance Expense $ 12,600
Utilities Expense $ 6,200
Administrative Expense $ 16,000 ___________
TOTALS $ 873,300 $ 873,300

In addition, Pitchfork has provided you with the following information for year-end adjusting entries:

1. The building was purchased on March 1 of the current year. It has a 30-year life, 10% salvage value and Pitchfork uses the straight-line method for depreciation.

2. On March 1, Pitchfork prepaid $12,600 for 24 months of insurance. The original entry was recorded as Insurance Expense.

3. By December 31st, 30% of the of the services related to the Unearned Revenues had been performed.

4. Wages of $4,600 should be accrued and are scheduled to be paid on January 2.

5. Supplies of $1,900 were still on hand at year end.

6. Based on industry averages, it is estimated that 3% of the accounts receivable will prove to be uncollectible.

Answer the following:

A. To record AJE #2, Pitchfork should do which of the following to record the correct adjustment:

B. Using the information presented above for Pitchfork Consulting Services, determine Net Income AFTER all adjustments have been recorded:

C. Using the information presented for Pitchfork Consulting Services, IF none of the (6) adjusting journal entries had been recorded, determine the effect on Total Assets.

D. Using the information presented for Pitchfork Consulting Services, IF none of the (6) adjusting journal entries had been recorded, determine the effect on Total Liabilities.

E. Using the information presented for Pitchfork Consulting Services, IF none of the (6) adjusting journal entries had been recorded, determine the effect on Total EQUITY.

Solutions

Expert Solution

If none of the adjusting entries are done , Total assets will be higher by 11,240 , Total Liabilities will be higher by 27,800 and Net income/total equity will be lower by 16,560. The below table shows that after posting of adjustments what will be the impact on Assets , Liabilities and Equity.

Working Notes :

ekkarill92 answered 2 years ago
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