Question

Learning Objectives 3, 5 P3-34A Journalizing adjusting entries and identifying the impact on financial statements 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. Adjusting Entry Specific Category of Accounts on the Balance Sheet Over / Understated Specific Category of Accounts on the Income Statement Over / Understated

Please explain your answer.

Answer 1

S.NO	ADJUSTING ENTRY	SPECIFIC CATEGORY OF ACCOUNT ON BALANCE SHEET SIDE	OVER / UNDERSTATED	SPECIFIC CATEGORY OF ACCOUNT ON INCOME ACCOUNT SIDE	OVER / UNDERSTATED
1	ELECTRICITY A/C DR   375            TO UTILITY PAYABLE A/C    375	UTILITY PAYABLE	UNDERSTATED	ELECTRICITY	UNDERSTATED
2	INSURANCE A/C DR   800           TO PREPAID INSURANCE A/C 800	PREPAID INSURANCE	OVERSTATED	INSURANCE	UNDERSTATED
3	REVENUE A/C DR   3000                              TO INCOME RECEIVABLE A/C 3000	ACCRUED INCOME - DEBTOR -RECEIVABLE	UNDERSTATED	INCOME	UNDERSTATED
4	DEPRECIATION A/C DR   3000           TO BOAT A/C    3000	BOAT	OVERSTATED	DEPRECIATION	UNDERSTATED
5	REVENUE A/C DR   9000                 TO ADVANCE RECEIVED A/C    9000	ADVANCE RECEIVED	OVERSTATED	REVENUE OR INCOME	UNDERSTATED