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 $1,150. The prepaid advertising contract was signed on January 1, 2019, and covers a four-month period. Rent of $1,650 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? 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

Accounting 121 Adjustments and the worksheet

must account for the following items: Supplies were purchased on January 1, 2019; inventory of supplies on January 31, 2019, is $1,150. The prepaid advertising contract was signed on January 1, 2019, and covers a four-month period. Rent of $1,650 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?

Answer 1

Judge Creative Designs
Adjusting Journal Entries
Date	Particulars	Debit	Credit
2019
31-Jan	Inventory of supplies	$                     1,150
	Income Summary		$                                       1,150
	(Inventory in hand out of purchased supplies recorded)
31-Jan	Advertisement	(Data is missing)
	Prepaid Advertisement
(Prepaid Advertising expired for Jan paid for 4month in advance)
31-Jan	Rent	$                     1,650
	Prepaid Rent		$                                       1,650
	(Prepaid Rent amounting to $854 expired)
31-Jan	Depreciation	(Data is missing)
	Equipment
(Depreciation on Equipment recorded ie (Value of Equipment/Useful Life)/12)
Note: Trail Balance in the above question is missing. Hence required adjusting entries
are passed. Since there is an insufficiency of data certain amounts cannot be calculated.
Income Statements cannot be prepared only adjustments can be shown.
Statement of Owners Equity cannot be prepared only format can be shown.
Judge Creative Designs
Income Statement for the month ended 31 Jan ,2019
	Sales	**
	Less: Cost Of Goods Sold	**
	Gross Profit	****
	Operating Expenses
	SellingExpenses	**
	Advertising Expenses	**
	Administrative Expense
	Office Supplies Expense	**
	Office Equipment depreciation	**
	Office Rent	**
	Total Operating Expenses	****
	Operating Income(Gross Profit-Operating Expenses)	***
	Non Operating Income/Expense
	Interest Revenue	***
	Gain on sale of Investment	****
	Interest Expense	(***)
	Loss from sale of any asset	(***)
	Total Non Operating Income/Expense	****
	Net Income(Operating Profit+/-Net Operating Income/Expense)	******
Statement Of Owners Equity as on 31,Jan,2019
	Investment in the beginning of the year	***
	Add: Investment made during the Month(Given)	Nil
	Add/Less: Net Income/(loss) for the month	***
	Less: Drawings during the month	***
	Investments at the end of the month	****
Effect of Adjusting Entries On Net Income
	Net Profit As Given	****
	Add: Inventory of Supplies	$                     1,150
	Less: Advertisement Expense	***
	Less: Rent	$                     1,650
	Less: Depreciation	***
	Net Profit After Adjustment	****
Since Data is not available Effect of adjustment cannot be shown.
However the format has been made for you.