Question

Required information [The following information applies to the questions displayed below.) North Star prepared the following unadjusted trial balance at the end of its second year of operations ending December 31. Credit Debit $11,800 5,80e 2,36€ 20,800 $ 1,120 1,120 Account Titles Cash Accounts Receivable Prepaid Rent Equipment Accumulated Depreciation Accounts Payable Income Tax Payable Common Stock Retained Earnings Sales Revenue Salaries and Wages Expense Utilities Expense Rent Expense Depreciation Expense Income Tax Expense Totals 24,60e 1,9ee 49,120 24,80e 12,300 $77,860 Other data not yet recorded at December 31: a. Rent expired during the year. $1,180. b. Depreciation expense for the year, $1,120. c. Utilities used and unpaid, $8,800. d. Income tax expense, $370.

Answer 1

Answer:

Question 4-B The net income would be overstated by $11,470 Difference in Net Income = $12,020 - $550 = $11,470 It would be overstated, because a higher net income would be reported, if the adjustment expense entries are not recorded. Question 4-A Preliminary Net Income: (Unadjusted) Sales Revenue $ 49,120 Less: Salaries and Wages Expense $ 24,800 Utilities Expense $ 12,300 Rent Expense Depreciation Expense $ Income Tax Expense Total Expenses $ 37,100 Unadjusted Net Income ($49,120 - $37,100) $ 12,020 49,120 24,800 Adjusted Net Income Sales Revenue $ Less: Salaries and Wages Expense $ Utilities Expense ($12,300 + $8,800) $ Rent Expense $ Depreciation Expense $ Income Tax Expense $ Total Expenses $ Adjusted Net Income ($49,120 - $48,120) $ 21,100 1,180 1,120 370 48,570 550