Question

Paula Judge owns Judge Creative Designs. The trial balance of the firm for January 31, 2019, the first month of operations, is shown below.

End-of-the-month adjustments must account for the following items:

Supplies were purchased on January 1, 2019; inventory of supplies on January 31, 2019, is $1,600.

The prepaid advertising contract was signed on January 1, 2019, and covers a four-month period.

Rent of $2,100 expired during the month.

Depreciation is computed using the straight-line method. The equipment has an estimated useful life of 10 years with no salvage value.

Required:

Complete the worksheet for the month.

Prepare an income statement, statement of owner’s equity, and balance sheet. No additional investments were made by the owner during the month.

Journalize and post the adjusting entries.

Analyze
If the adjusting entries had not been made for the month, would net income be overstated or understated?

Complete this question by entering your answers in the tabs below.

Req 1

Req 2 Inc Stmt

Req 2 Stmt of OE

Req 2 Bal Sheet

Req 3 Gen Journal

Req 3 Ledgers

Analyze

Complete the worksheet for the month.

JUDGE CREATIVE DESIGNS Worksheet Month Ended January 31, 2019 Account Name Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Cash $36,500 Accounts Receivable 13,600 Supplies 9,750 Prepaid Advertising 12,400 Prepaid Rent 25,200 Equipment 33,600 Accumulated Depreciation—Equipment Accounts Payable 16,550 Paula Judge, Capital 61,000 Paula Judge, Drawing 8,000 Fees Income 74,100 Advertising Expense Depreciation Expense—Equipment Rent Expense Salaries Expense 10,700 Supplies Expense Utilities Expense 1,900 Sub—Totals $151,650 $151,650 Totals

Answer 1

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				Adjustments		Adjusted Trial Balance		Income Statement		Balance Sheet
	Account Name	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
	Cash	36500				36500				36500
	Accounts Recevable	13600				13600				13600
	Supplies	9750			8150	1600				1600
	Prepaid Advertising	12400			3100	9300				9300
	Prepaid Rent	25200			2100	23100				23100
	Equipment	33600				33600				33600
	Accumulated Dep-Equipment				280		280				280
	Accounts Payable		16550				16550				16550
	Paula Judge, Capital		61000				61000				61000
	Paula Judge, Drawing	8000				8000				8000
	Fees Income		74100				74100		74100
	Advertising Expense			3100		3100		3100
	Depreciation Expense-Equipment			280		280		280
	Rent Expense			2100		2100		2100
	Salaries Expense	10700				10700		10700
	Supplies Expense			8150		8150		8150
	Utilities Expense	1900				1900		1900
	Sub Totals	151650	151650	13630	13630	151930	151930	26230	74100	125700	77830
	Net Income								47870		47870
	Total									125700	125700
	Journal:
Event	Account	Debit	Credit
1	Supplies Expense 9750-1600	8150
	Supplies		8150
2	Advertising Expense 12400/4	3100
	Prepaid Advertising		3100
3	Rent Expense	2100
	Prepaid Rent		2100
4	Depreciation Expense-Equipment	3360
	Accumulated Dep-Equipment		3360
	(33600/10)

Without adjusting entries, net income would be over stated as adjusting entries are related to expenses only