Adjusting Entries

Chapter 3 – Adjusting Entries
Selected account balances before adjustment for Atlantic Coast Realty at July 31, the end of the current year, are as follows:

	Debits	Credits
Accounts Receivable	$75,000
Equipment	345,700
Accumulated Depreciation—Equipment		$112,500
Prepaid Rent	9,000
Supplies	3,350
Wages Payable		–
Unearned Fees		12,000
Fees Earned		660,000
Wages Expense	325,000
Rent Expense	–
Depreciation Expense	–
Supplies Expense	–

Data needed for year-end adjustments are as follows:

•	Unbilled fees at July 31, $11,150.
•	Supplies on hand at July 31, $900.
•	Rent expired, $6,000.
•	Depreciation of equipment during year, $8,950.
•	Unearned fees at July 31, $2,000.
•	Wages accrued but not paid at July 31, $4,840.
		Required:
1.		Journalize the six adjusting entries required at July 31, based on the data presented.
2.		What would be the effect on the income statement if the adjustments for unbilled fees and accrued wages were omitted at the end of the year?
3.		What would be the effect on the balance sheet if the adjustments for unbilled fees and accrued wages were omitted at the end of the year?
4.		What would be the effect on the “Net increase or decrease in cash” on the statement of cash flows if the adjustments for unbilled fees and accrued wages were omitted at the end of the year?
CHART OF ACCOUNTS
Atlantic Coast Realty
General Ledger
ASSETS 11 Cash 12 Accounts Receivable 13 Supplies 14 Prepaid Rent 15 Land 16 Equipment 17 Accumulated Depreciation-Equipment   LIABILITIES 21 Accounts Payable 22 Unearned Fees 23 Wages Payable 24 Taxes Payable EQUITY 31 Common Stock 32 Retained Earnings 33 Dividends			REVENUE 41 Fees Earned 42 Rent Revenue EXPENSES 51 Advertising Expense 52 Insurance Expense 53 Rent Expense 54 Wages Expense 55 Supplies Expense 56 Utilities Expense 57 Depreciation Expense 59 Miscellaneous Expense

 
 
 

1. Journalize the six adjusting entries required at July 31, based on the data presented.

General Journal Instructions
 
 
 
PAGE 10
 
JOURNAL
ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1		Adjusting Entries
2
3
4
5
6
7
8
9
10
11
12
13

 
 
 
 
 
 
Questions
 

2. What would be the effect on the income statement if the adjustments for unbilled fees and accrued wages were omitted at the end of the year?

                                                          Select one from below:      Enter amount below:

1. Fees earned                  Over/Understated               Amount

 

2. Wages expense                  Over/Understated               Amount

 

3. Net income                 Over/Understated                 Amount

 

3. What would be the effect on the balance sheet if the adjustments for unbilled fees and accrued wages were omitted at the end of the year?

Same as above, select over/understated and enter amount

	Over/Understated	Amount
Accounts receivable
Total assets
Wages payable
Total liabilities
Retained earnings
Total liabilities and stockholders’ equity

 

4. What would be the effect on the “Net increase or decrease in cash” on the statement of cash flows if the adjustments for unbilled fees and accrued wages were omitted at the end of the year?  

Options: Overstated/Understated/No effect