Question

Adjusting Entries

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

	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	_

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.

Nov. 30
30
30
30
30
30

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.

Fees earned		by $
Depreciation expense		by $
Net income		by $

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.

Accumulated depreciation		by $
Total assets		by $
Unearned fees		by $
Total liabilities		by $
Owner's equity		by $
Total liabilities and owner's equity		by $

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?

Answer 1

Answer 1

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)

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

Fees Earned	Decrease	by $4160
Depreciation Expense	Decrease	by $780
Net Income	Decrease	by $3380

Answer 3

Accumulated depreciation	Decrease	by $780
Total assets	Increase	by $780
Unearned fees	Increase	by $4160
Total liabilities	Increase	by $4160
Owners equity	Decrease	by $3380
Total liabilities and Owners equity	Increase	by $780

Answer 4

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