Question :Griffin Fishing Charters has collected the following data for the December 31 adjusting entries: a. The company received its electric bill on December 31 for \(375 but will not pay it until January 5. (Use the Utilities Payable account.) b. Griffin purchased a three-month boat insurance policy on November 1 for \)1,200. Griffin recorded a debit to Prepaid Insurance. c. As of December 31, Griffin had earned \(3,000 of charter revenue that has not been recorded or received. d. Griffin’s fishing boat was purchased on January 1 at a cost of \)33,500. Griffin expects to use the boat for 10 years and that it will have a residual value of \(3,500. Determine annual depreciation assuming the straight-line depreciation method is used. e. On October 1, Griffin received \)9,000 prepayment for a deep-sea fishing charter to take place in December. As of December 31, Griffin has completed the charter. Requirements 1. Journalize the adjusting entries needed on December 31 for Griffin Fishing Charters. Assume Griffin records adjusting entries only at the end of the year. 2. If Griffin had not recorded the adjusting entries, indicate which specific category of accounts on the financial statements would be misstated and if the misstatement is overstated or understated. Use the following table as a guide

Step by step solution

01

Step-by-Step-SolutionStep1: Calculation of Insurance Expense

Insurance expense is calculated as follows:

$$\begin{gathered} \mathbf{InsuranceExpense}\mathbf{=}\mathbf{AmountPaid}\mathbf{\times }\frac{\mathbf{NumberofMonthsExpired}}{\mathbf{TotalMonthsofInsurancePaid}} \\ \mathbf{=}\mathbf{\$}\mathbf{1}\mathbf{,}\mathbf{200}\mathbf{\times }\frac{\mathbf{2}}{\mathbf{3}} \\ \mathbf{=}\mathbf{\$}\mathbf{800} \end{gathered}$$

02

Calculation of Depreciation Expense

Depreciation expenseis calculated as follows:

$$\begin{gathered} \mathbf{DepreciationExpense}\mathbf{=}\frac{\mathbf{Cost}-\mathbf{ResidualValue}}{\mathbf{UsefulLife}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{33}\mathbf{,}\mathbf{500}-\mathbf{\$}\mathbf{3}\mathbf{,}\mathbf{500}}{\mathbf{10}} \\ \mathbf{=}\mathbf{\$}\mathbf{3}\mathbf{,}\mathbf{000} \end{gathered}$$

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