Question

Kee Company accumulates the following adjustment data at December 31. Indicate (a) the balance sheet account that requires adjustment and whether the identified balance sheet account is over-or understated before any adjustments are recorded. b] Balance sheet account Overstated or Understated (a) Balance sheet account Supplies of $100 are on hand. Kee Company started the year with $1,100 of supplies on hand. 2. Services were performed but not recorded. 3. Interest of $200 has accumulated on a note payable. Collected $650 of cash in advance before performing the related services. The services have now been performed

Answer 1

Solution:

Question: 1

1	Supplies	Overstated
2	Accounts Receivables	Understated
3	Interest Payable	Understated
4	Unearned Revenue	Overstated

Notes:

1) Supplies on hand at year beginning is $1,100 and at year end is $100, which means there is supplies expense of $1000 during the year. If we do not post that entry, the balance in supplies will be $ 1,100 which leads to overstated balance of $1,000.

2) Service preformed on account will increase the accounts receivables balance. By not posting such entry, the accounts receivables balance will be understated.

3) Interest accumulation will increase interest payable account. By not posting such entry, the interest payable account will be understated.

4) We have received cash for service, which will be preformed in future and it is called as unearned revenue. If do not post the entry after performing the service, the unearned revenue will remains same.So, It is Overstated.