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Chapter 3: Q.3-5TI-b (page 144)

Identify the impact on the income statement and balance sheet if adjusting entries for the following situations were not recorded. a. Office Supplies used, \(800. b. Accrued service revenue, \)4,000. c. Depreciation on building, \(3,500. d. Prepaid Insurance expired, \)650. e. Accrued salaries expense, \(2,750. f. Service revenue that was collected in advance has now been earned, \)130

Short Answer

Expert verified

In the balance sheet, accounts receivable and equity will be understated, and in the income statement, service revenue and net income will be understated.

Step by step solution

01

Impact on Income Statement

Accrued service revenue are the earned revenues of the business, not recording the adjusting entries will reduce the service revenues, and also will lead to reduction in the net income

02

Impact on Balance Sheet

Accrued service revenue increase the accounts receivable balance as cash is not received for the revenue earned, not recording the adjusting entry will decrease accounts receivable in asset section. Also as net income is decreased, it will decrease equity (Retained earnings) also.

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Most popular questions from this chapter

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

Resort Travel borrowed \(33,000 on September 1, 2018, by signing a one-year note payable to State One Bank. Resort’s interest expense on the note payable for the remainder of the fiscal year (September through November) is \)355. Requirements 1. Record the adjusting entry to accrue interest expense at November 30, 2018. 2. Post the adjusting entry to the T-accounts of the two accounts affected by the adjustment.

Question: Hooten Carpentry had the following accounts and account balances after adjusting entries. Assume all accounts have normal balances. Prepare the adjusted trial balance for Hooten Carpentry as of December 31, 2018. Cash \( 4,025 Common Stock \) ? Land 5,000 Accounts Receivable 660 Utilities Expense 400 Office Supplies 120 Accounts Payable 225 Utilities Payable 210 Accumulated Depreciation—Equipment 1,000 Service Revenue 12,000 Salaries Expense 550 Unearned Revenue 300 Supplies Expense 80 Depreciation Expense—Equipment 800 Equipment 10,000 Dividends 500.

Question:Seth’s Tax Services had the following accounts and account balances after adjusting entries. Assume all accounts have normal balances.Cash Land Accounts Payable Utilities Payable Accumulated Depreciation—Equipment Service Revenue Supplies Expense Dividends \( ? 26,000 150 3,700 1,800 75,000 1,100 14,000 Equipment Accounts Receivable Common Stock Office Supplies Utilities Expense Unearned Revenue Depreciation Expense—Equipment Salaries Expense \) 11,000 4,950 700 22,600 1,650 900 1,900 5,600Prepare the adjusted trial balance for Seth’s Tax Services as of December 31, 2018.

Question :The worksheet of Macey’s Landscaping Services follows but is incomplete.Requirements 1. Calculate and enter the adjusted account balances in the Adjusted Trial Balance columns. 2. Describe each adjusting entry. For example, a. Prepaid rent expires, $1,150.
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