Question

Selected account balances before adjustment for Intuit Realty at November 30, the end of the current year, follow:

	Debits		Credits
Accounts Receivable	$70,150
Equipment	108,000
Accumulated Depreciation - Equipment			$10,800
Prepaid Rent	8,800
Supplies	2,100
Wages Payable			_
Unearned Fees			9,680
Fees Earned			409,680
Wages Expense	138,200
Rent Expense	_
Depreciation Expense	_
Supplies Expense	_

Data needed for year-end adjustments are as follows:

Required:

• Supplies on hand at November 30, $630.
• Depreciation of equipment during year, $1,050.
• Rent expired during year, $6,450.
• Wages accrued but not paid at November 30, $2,030.
• Unearned fees at November 30, $4,070.
• Unbilled fees at November 30, $4,840.

1. Journalize the six adjusting entries required at November 30, based on the data presented. If an amount box does not require an entry, leave it blank.

Nov. 30
30
30
30
30
30

2. What would be the effect on the income statement if the adjustments for equipment depreciation and unearned fees were omitted at the end of the year? Enter all amounts as positive numbers.

Fees earned		by $
Depreciation expense		by $
Net income		by $

3. What would be the effect on the balance sheet if the adjustments for equipment depreciation and unearned fees were omitted at the end of the year? Enter all amounts as positive numbers.

Accumulated depreciation		by $
Total assets		by $
Unearned fees		by $
Total liabilities		by $
Owner's equity		by $
Total liabilities and owner's equity		by $

4. What would be the effect on “Net increase or decrease in cash” on the statement of cash flows if the adjustments for equipment depreciation and unearned fees were omitted at the end of the year?

Answer 1

Answer 1.
	Journal Entry
Date	Accounts and Explanations	Debit	Credit
a.	Supplies Expense	1,470		$2,100 - $630
	Supplies		1,470	$2,100 - $630
	(Record the supplies used)
b.	Depreciation Expense	1,050
	Accumulated Depreciation - Equipment		1,050
	(record the depreciation on equipment)
c.	Rent Expenses	6,450
	Prepaid Rent		6,450
	(Record the rent expenses)
d.	Wages Expenses	2,030
	Wages Payable		2,030
	(record the wages due)
e.	Unearned Fees	5,610		$9,680 - $4,070
	Fees Earned		5,610	$9,680 - $4,070
	(record the fees earned)
f.	Accounts Receivable	4,840
	Fees Earned		4,840
	(record the fees earned)

Answer 2.
		Amount
Fees Earned	Understated	5,610
Depreciation Expenses	Understated	1,050
Net Income	Understated	4,560
Answer 3.
Accumulated Depreciation	Understated	1,050
Total Assets	Overstated	1,050
Unearned Fees	Overstated	5,610
Total Liabilities	Overstated	5,610
Owners' Capital	Understated	4,560
Total Liabilities & Owners' Equity	Overstated	1,050
Answer 4.
Net Increase or decrease in cash on the Statement of Cash Flow	No Effect	-