Question

Instructions Selected account balances before adjustment for Atlantic Coast Realty at July 31, the end of the current year, are as follows: Credits Debits $ 75,000 345,700 $112,500 9,000 3.350 Accounts Receivable Equipment Accumulated Depreciation Equipment Prepaid Rent Supplies Wages Payable Unearned Fees Fees Earned Wages Expense Rent Expense Depreciation Expense Supplies Expense 12,000 680,000 325,000 Data needed for year-end adjustments are as follows: . Unbilled fees at July 31, $11,150. • Supplies on hand at July 31. $900.

Answer 1

Atlantic Coast Realty Adjusting Journal entries No. Date Description 1 31-Jul Accounts Receivable Fees Earned Credit Calculation Post ref Debit J10 $ 11,150 J10 Accounting Equation Assets Liabilties Equity $ 11,150 $ 11,150 $ 11,150 $ 2,450 $ (2,450) =3,350-900 2 31-Jul Supplies expense Supplies J10 J10 $ 2,450 $ (2,450) J10 $ 6,000 3 31-Jul Rent expense Prepaid Rent $ (6,000) $ 6,000 $6,000) $ 8,950 $ (8,950) 4 31-Jul Depreciation expense Accumulated Depreciation-Equipment J10 $ 8,950 $ (8,950) J10 $ 10,000 $(10,000) =12,000-2,000 5 31-Jul Unearned Fees Fees Earned J10 $ 10,000 $ 10,000 $ 4,840 $ (4,840) 6 31-Jul Wages expense Wages Payable J10 J10 $ 4,840 $ 4,840 Amount If adjustments for unbilled fees & accrued wages were omitted Req2 Effect on income statement Over/Understated Fees Earned Understated Wages expense Understated Net Income Understated $ 11,150 $ 4,840 $ 6,310 =11,150-4,840 Reg 3 Effect on balance sheet Accounts Receivable Total Assets Wages Payable Total Liabilties Owners Equity Total Liabilties and Owners Equity Over/Understated Understated Understated Understated Understated Understated Understated Amount $ 11,150 $ 11,150 $ 4,840 $ 4,840 $ 6,310 $ 11,150 =11,150-4,840 -4,840+6,310 Reg 4 Effect on cashflow statement Net increase or decrease in cash No effect As both are adjusting entries with no impact on cash