Question

On December 31, 2017, Carla Vista Co. prepared an income statement and balance sheet, but failed to take into account three adjustments. The balance sheet showed total assets $135,000, total liabilities $63,000, and stockholders’ equity $72,000. The incorrect income statement showed net income of $63,000.

The data for the three adjustments were:

1.		Salaries and wages amounting to $9,000 for the last 2 days in December were not paid and not recorded. The next payroll will be in January.
2.		Rent payments of $7,200 was received for two months in advance on December 1. The entire amount was recorded as Unearned Rent Revenue when received.
3.		Depreciation expense for 2017 is $8,100.

Complete the following table to correct the financial statement amounts shown (indicate deductions with parentheses).

Item		Net Income		Total Assets		Total Liabilities		Stockholders’ Equity
Incorrect balances		$63,000		$135,000		$63,000		$72,000
Effects of:
Salaries and Wages
Rent Revenue
Depreciation
Correct balances		$		$		$		$

Answer 1

Requirement, as asked

Item	Net Income	Total Assets	Total Liabilities	Stockholders’ Equity
Incorrect balances	$63,000	$135,000	$63,000	$72,000
Effects of:
Salaries and Wages	($9,000)		$9,000	($9,000)
Rent Revenue (1 month rent earned = $ 7200 x 1/2)	$3,600		($3,600)	$3,600
Depreciation	($8,100)	($8,100)		($8,100)
Correct balances	$49,500	$126,900	$68,400	$58,500