Question

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

	Debits	Credits
Accounts Receivable	$ 75,000
Equipment	250,000
Accumulated Depreciation-Equipment		$12,000
Prepaid Rent	12,000
Supplies	3,170
Wages Payable		–
Unearned Fees		10,000
Fees Earned		400,000
Wages Expense	140,000
Rent Expense	–
Depreciation Expense	–
Supplies Expense	–

Data needed for year-end adjustments are as follows:

	a. Supplies on hand at November 30, $550.
	b. Depreciation The systematic periodic transfer of the cost of a fixed asset to an expense account during its expected useful life. of equipment during year, $1,675.
	c. Rent expired during year, $8,500.
	d. Wages accrued but not paid at November 30, $2,000.
	e. Unearned fees at November 30, $4,000.
	f. Unbilled fees at November 30, $5,380.

	Required:
1.	Journalize the six adjusting entries required at November 30, based on the data presented. Refer to the Chart of Accounts for exact wording of account titles.
2.	What would be the effect on the income statement if adjustments (b) and (e) were omitted at the end of the year?
3.	What would be the effect on the balance sheet if adjustments (b) and (e) 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 (b) and (e) were omitted at the end of the year?

none

X

Chart of Accounts

CHART OF ACCOUNTS
Intuit Realty
General Ledger
ASSETS 11 Cash 12 Accounts Receivable 13 Supplies 14 Prepaid Rent 15 Land 16 Equipment 17 Accumulated Depreciation-Equipment 19 Accumulated Depreciation-Automobiles LIABILITIES 21 Accounts Payable 22 Unearned Fees 23 Wages Payable 24 Taxes Payable EQUITY 31 Owner, Capital 32 Owner, Drawing	REVENUE 41 Fees Earned 42 Rent Revenue EXPENSES 51 Advertising Expense 52 Insurance Expense 53 Rent Expense 54 Wages Expense 55 Supplies Expense 56 Utilities Expense 57 Depreciation Expense 59 Miscellaneous Expense

none

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Journal

1. Journalize the six adjusting entries required at November 30, based on the data presented. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1		Adjusting Entries
2
3
4
5
6
7
8
9
10
11
12
13

Solution

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1		Adjusting Entries
2
3
4
5
6
7
8
9
10
11
12
13

Points:

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Explanation

none

X

Final Questions

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

	Over/Understated	Amount
Fees earned	selector 1 Understated Overstated No effect
Depreciation expense The portion of the cost of a fixed asset that is recorded as an expense each year of its useful life.	selector 2 Understated Overstated No effect
Net income	selector 3 Understated Overstated No effect

Points:

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

	Over/Understated	Amount
Accumulated Depreciation The contra asset account credited when recording the depreciation of a fixed asset. -Equipment	selector 1 Understated Overstated No effect
Total assets	selector 2 Understated Overstated No effect
Unearned fees	selector 3 Understated Overstated No effect
Total liabilities	selector 4 Understated Overstated No effect
Owner’s capital	selector 5 Understated Overstated No effect
Total liabilities and owner’s equity	selector 6 Understated Overstated No effect

Points:

4. What would be the effect on the “Net increase or decrease in cash” on the statement of cash flows if adjustments (b) and (e) were omitted at the end of the year? selector 1

Understated

Overstated

No effect

Points:

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Explanation

Answer 1

Answer 1.
Journal Entry
Date	Particulars	Dr. Amt.	Cr. Amt.
a.	Supplies Expense	2,620.00		$3,170 - $550
	Supplies		2,620.00	$3,170 - $550
	(Record the supplies used)
b.	Depreciation Expense	1,675.00
	Accumulated Depreciation - Equipment		1,675.00
	(record the depreciation on equipment)
c.	Rent Expenses	8,500.00
	Prepaid Rent		8,500.00
	(Record the rent expenses)
d.	Wages Expenses	2,000.00
	Wages Payable		2,000.00
	(record the wages due)
e.	Unearned Fees	6,000.00		$10,000 - $4,000
	Fees Earned		6,000.00	$10,000 - $4,000
	(record the fees earned)
f.	Accounts Receivable	5,380.00
	Fees Earned		5,380.00
	(record the fees earned)

Answer 2.
		Amount
Fees Earned	Understated	6,000.00
Depreciation Expenses	Understated	1,675.00
Net Income	Understated	4,325.00
Answer 3.
Accumulated Depreciation	Understated	1,675.00
Total Assets	Overstated	1,675.00
Unearned Fees	Overstated	6,000.00
Total Liabilities	Overstated	6,000.00
Owners' Capital	Understated	4,325.00
Total Liabilities & Owners' Equity	Overstated	1,675.00
Answer 4.
Net Increase or decrease in cash on the Statement of Cash Flow	No Effect	-