Question

Bock PQ3 Chapter 3, EX23 1. EX.03.23 Calculator Effects of Errors on Financial Statements The accountant for Healthy Life Company, a medical services Consulting firm, mistakenly omitted adjusting entries for (a) unearned revenue earned during the year (534,900) and (b) accrued wages ($12,770). Indicate the effect of each error, considered individually, on the income statement for the current year ended July 31. Also indicate the effect of each error on the 31 balance sheet Enter l amounts as positive numbers. Enter 'O' in those spaces where there is no overstatement or no understatement Error(a) The adjusting entry for earned revenue earned during the year ($34,900) was omitted Overstated Understated 1. Revenue for the year would be 2. Expenses for the year would be 3. Net Income for the year would be 1. Assets y 31 would be 5. Libris at Suly 31 would be 6. Store POS Chaus Understated Error (b) The adjusting entry for accrued wages (812,770) was omitted Overstated 1. Revenue for the year would be 2. Expenses for the year would be 3. income for the year would be Progress 1 ms Aasian or 0.0%

Answer 1

Error (a) The adjusting entry for unearned revenue earned during the year $34900 was omitted.

1) Revenue for the year would be $34900(Understated)

2)Expense for the year would be $0

3)Net income for the year would be $34900 (understated)

4)Assets at july 31 would be $34900(Underatated)

5)Liabilities at july 31 would be $0

6)Stockholders equity at july 31 would be $0

Error (b) The adjusting entry for accured wages $12770 was omitted.

1) Revenue for the year would be $0

2)Expense for the year would be $12770(Understated)

3)Net income for the year would be $ 12770(Overstated)

4)Assets at july 31 would be $0

5)Liabilities at july 31 would be $12770 (Understated)

6)Stockholders equity at july 31 would be $0

Unearned revenue is recorded on a company’s balance sheet as a asset. It is treated as a asset because the revenue has still been earned but not received.

The accrued wages entry is a debit to the wages expense account, and a credit to the accrued wages account.