Question

1. At the end of 2018, ABC Company did not make the adjusting entry to record depreciation of building. Indicate the effect of this error on 2018 Net Income, Assets, Liabilities, and Owner’s Equity (on December 31, 2018) respectively. Use O for overstate, U for understate, NE for no effect. State your answer in the same order as the items underlined in the question:

2. On 3/31/2018, ABC company borrowed $1,000,000 from the bank with an annual interest rate of 5% to be paid on 3/31/2019. At the end of 2018, ABC Company did not make the adjusting entry to accrue interest. Indicate the effect of this error on 2018 Net Income, Assets, Liabilities, and Owner’s Equity (on December 31, 2018) respectively. Use O for overstate, U for understate, NE for no effect. State your answer in the same order as the items underlined in the question:

3. At Wiki Co., all supply purchases were recorded as Supplies Expenses upon purchase. The balance sheet on 12/31/2017 reports a balance for Supplies in the amount of $800. During the year the firm purchased $2,000 supplies. On 12/31/2018, actual supplies on hand amounted to $1,250. Provide the adjusting entry on 12/31/2018. For account names, please use the following account names exactly as it is spelled (you can use copy/paste): Supplies Expenses; Supplies; Cash; Supplies Payable; Other.

Answer 1

1.)		Effect
	Net Income	Overstate
	Assets	Overstate
	Liabilities	No Effect
	Owner's Equity	Overstate
2.)		Effect
	Net Income	Overstate
	Assets	No Effect
	Liabilities	Understate
	Owner's Equity	Overstate
3.)	Account Titles	Debit $	Credit $
	Supplies	450
	Supplies Expense		450
	(1,250 - 800 )