Question

[The following information applies to the questions displayed below.] On December 31, the bookkeeper for Grillo Company prepared the following income statement and balance sheet summarized here but neglected to consider three adjusting entries. Data on the three adjusting entries follow: a. Rent revenue of $1,600 earned in December of the current year was neither collected nor recorded. b. Depreciation of $3,400 on the equipment for the current year was not recorded. c. Income tax expense of $5,900 for the current year was neither paid nor recorded. 4-18 Part 2 . Complete the two columns to the right in the following tabulation to show the effects of the adjusting entries and the corrected mounts on the income statement and balance sheet. (Enter deductions and negative amounts with a minus sign.) Income Statement As Prepared Effects of Adjusting Entries Corrected Amounts $ 104,000 (78,000) Revenues Expenses Income tax expense Net income $ 26,000 Balance Sheet As Prepared Effects of Adjusting Entries Corrected Amounts Assets Cash $ 37,000 41,000 Accounts receivable Rent receivable Equipment Accumulated depreciation 62,000 (13,000) $ 127,000 $ 12,000 Liabilities Accounts payable Income taxes payable Stockholders' Equity Common stock Additional paid-in capital Retained earnings 7,750 23,250 84,000 $ 127,000

Answer 1

Solution Income statement Revenue Expenses Income tax expense Net income As prepared Effects of adjusting entries corrected amounts $ 104,000 $ 1,600 $ 105,600 $ (78,000) $ (3,400) $ (81,400) $ $ (5,900) $ (5,900) $ 26,000 $ (7.700) $ 18.300 Balance sheet As prepared Effects of adjusting entries corrected amounts Assets Cash $ 37,000 $ 37,000 Accounts receivable $ 41,000 $ 41,000 rent receivable $ $ 1,600 $ 1,600 Equipment $ 62,000 $ 62,000 Accumulated depreciation $ (13,000) $ (3,400) $ (16,400) 127,000 $ (1,800) $ 125,200 Liabilities Accounts payable $ 12,000 $ 12,000 Income tax payable $ $ 5,900 $ 5,900 Stockholders equity $ Common stock $ 7,750 $ 7,750 Additional paid in capital $ 23,250 23,250 Retained earnings $ 84,000 $ 84,000 $ 127,000 5,900 $ 132,900 $